what is the yield to maturity of a ten year $5000 bond with a 5.4% coupon...

what is the yield to maturity of a ten year $5000 bond with a 5.4% coupon rate and semiannual coupons if this bond is currently trading for a price of $4725.70?

Solutions

Expert Solution

Coupon Amount (C) = (Coupon rate / Compounding frequency )* Face value= 5.4%/2 = 0.027 *5000 = $135

Face value FV= 5000; selling price (S) = 4725.70

No of periods will be multiplied by 2 becasue of semi annual payments (N)= 10 * 2= 20

YTM = C+[(FV-S)/N] / (0.4F +0.6P)

= 135+[(5000-4725.70)/20] / (0.4*5000 +0.6*4725.70)

YTM= 3.08%

Annual YTM= multiply semi annaul ytm with 2=> 3.08*2 = 6.16

Annual YTM= 6.16%

jeff jeffy answered 2 years ago

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