The bonds issued by Stainless Tubs bear a 8 percent coupon, payable semiannually. The bonds mature...

The bonds issued by Stainless Tubs bear a 8 percent coupon, payable semiannually. The bonds mature in 8 years and have a $1,000 face value. Currently, the bonds sell for $1042. What is the yield to maturity?

Expert Solution

YTM is the rate at which PV of cash Inflows are equal to Current price of the bond.

YTM for six months = Rate at which least +ve NPV + [ NPV at That rate / chnage in NPV due to 0.5% chnage in rate ] * 0.5%

= 3.5% + [ 18.47 / 60.47 ] *0.5%

= 3.5% + 0.15%

= 3.65%

YTM per anum = YTM for six months * 2

= 3.65% * 2

= 7.30%

YTM = 7.30%

jeff jeffy answered 2 days ago

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