In: Finance
(Yield to maturity) Abner Corporation's bonds mature in
18
years and pay
9
percent interest annually. If you purchase the bonds for
$825,
what is your yield to maturity?
Your yield to maturity on the Abner bonds is
nothing%.
(Round to two decimal places.)
Yield to maturity (YTM) on the Abner bond
Variables |
Financial Calculator Keys |
Figure |
Par Value/Face Value of the Bond [$1,000] |
FV |
1,000 |
Coupon Amount [$1,000 x 9.00%] |
PMT |
90 |
Market Interest Rate or Yield to maturity on the Bond |
1/Y |
? |
Maturity Period/Time to Maturity [18 Years] |
N |
18 |
Bond Price/Current Market Price of the Bond [-$825] |
PV |
-825 |
We need to set the above figures into the financial calculator to find out the Yield to Maturity of the Bond. After entering the above keys in the financial calculator, we get the annual yield to maturity on the bond (1/Y) = 11.32%.
“Hence, the Yield to maturity (YTM) on the Abner bond will be 11.32%”