Question

1- Calculate the yield to maturity on the following bonds:

A- A 8.6 percent coupon (paid semiannually) bond, with a $1,000 face value and 10 years remaining to maturity. The bond is selling at $915.

B- An 5.7 percent coupon (paid quarterly) bond, with a $1,000 face value and 10 years remaining to maturity. The bond is selling at $911.

C- An 7.7 percent coupon (paid annually) bond, with a $1,000 face value and 8 years remaining to maturity. The bond is selling at $1,061.

  
(For all requirements, do not round intermediate calculations. Round your answers to 3 decimal places. (e.g., 32.161))

a.	Yield to maturity		% per year
b.	Yield to maturity		% per year
c.	Yield to maturity

Answer 1

a.	Yield to maturity	9.962%	Per year
b.	Yield to maturity	6.942%	Per year
c.	Yield to maturity	6.691%	Per year

Working:

Using financial calculator BA II Plus - Input details:	a.
FV = Future Value =	-$1,000.00
PV = Present Value =	$915.00
N = Total number of periods = Years x frequency =	20
PMT = Payment = Coupon / frequency =	-$43.00
CPT > I/Y = Rate or YTM =	4.9810
Convert Yield in annual and percentage form = Yield*2 / 100 =	9.962%

Using financial calculator BA II Plus - Input details:	b.
FV = Future Value =	-$1,000.00
PV = Present Value =	$911
N = Total number of periods = Years x frequency =	40
PMT = Payment = Coupon / frequency =	-$14.25
CPT > I/Y = Rate or YTM =	1.7354
Convert Yield in annual and percentage form = Yield*4 / 100 =	6.942%

Using financial calculator BA II Plus - Input details:	c.
FV = Future Value =	-$1,000.00
PV = Present Value =	$1,061
N = Total number of periods = Years x frequency =	8
PMT = Payment = Coupon / frequency =	-$77.00
CPT > I/Y = Rate or YTM =	6.6907
Convert Yield in annual and percentage form = Yield*1 / 100 =	6.691%