What is the YTM of a bond with the the following characteristics: Face value - $1,000;...

What is the YTM of a bond with the the following characteristics: Face value - $1,000; Current Price - $902; Coupon rate - 10%; Maturity - 7 yrs; Pays semi-annually

Expert Solution

YTM is the rate at which PV of Cash flows are equal to Bond price.

YTM = Rate at which least +ve NPV + [ NPV at that rate / Diff in NPV dur to 0.5% inc in Rate ] * 0.5%

= 6% + [5.05 / 42.26] * 0.5%

= 6% + 0.06%

= 6.06% per six months i.e 12.12%

jeff jeffy answered 4 months ago

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