A $1,000 par value 14-year bond with a 10 percent coupon rate recently sold for $965....

A $1,000 par value 14-year bond with a 10 percent coupon rate recently sold for $965. The yield to maturity is

A. 10.49%.
B. 10.00%.
C. 8.87%.
D. 6.50%.

Solutions

Expert Solution

Annual coupon=1000*10%=100

Approx Yield to maturity=[Annual coupon+(Face value-Present value)/time to maturity]/(Face value+Present value)/2

=[100+(1000-965)/14]/(1000+965)/2

which is equal to

=10.49%(Approx)

jeff jeffy answered 2 years ago

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