Question

Heginbotham Corp. issued 10-year bonds two years ago at a coupon rate of 8.1 percent. The bonds make semiannual payments. If these bonds currently sell for 102 percent of par value, what is the YTM? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

YTM

%

Financial Calculator Inputs please

Answer 1

YTM is the rate at which PV of Cash Inflows are equal to Bond Price

Balnce Period is 8 yeasr (16 Periods)

Period	CF	PVF @3.5%	Disc CF	PVF @4%	Disc CF
0	$ -1,020.00	1.0000	$ -1,020.00	1.0000	$ -1,020.00
1	$        40.50	0.9662	$        39.13	0.9615	$        38.94
2	$        40.50	0.9335	$        37.81	0.9246	$        37.44
3	$        40.50	0.9019	$        36.53	0.8890	$        36.00
4	$        40.50	0.8714	$        35.29	0.8548	$        34.62
5	$        40.50	0.8420	$        34.10	0.8219	$        33.29
6	$        40.50	0.8135	$        32.95	0.7903	$        32.01
7	$        40.50	0.7860	$        31.83	0.7599	$        30.78
8	$        40.50	0.7594	$        30.76	0.7307	$        29.59
9	$        40.50	0.7337	$        29.72	0.7026	$        28.45
10	$        40.50	0.7089	$        28.71	0.6756	$        27.36
11	$        40.50	0.6849	$        27.74	0.6496	$        26.31
12	$        40.50	0.6618	$        26.80	0.6246	$        25.30
13	$        40.50	0.6394	$        25.90	0.6006	$        24.32
14	$        40.50	0.6178	$        25.02	0.5775	$        23.39
15	$        40.50	0.5969	$        24.17	0.5553	$        22.49
16	$        40.50	0.5767	$        23.36	0.5339	$        21.62
16	$ 1,000.00	0.5767	$     576.71	0.5339	$     533.91
NPV			$        46.52		$      -14.17

YTM per 6 Months = Rate at which least +ve NPV + { NPV at that Rate / CHange oin NPV due to 0.5% inc in disc rate ] * 0.5%

= 3.5% + [ 46.52 / 60.69 ] * 0.5%

= 3.5% + [ 0.77 * 0.5% ]

= 3.5% + 0.38%

= 3.88%

YTM per anum = YTM per 6 M * 2

= 3.88% * 2

= 6.77%