Question
In: Finance
Abner Corporation's bonds mature in 17 years and pay 14 percent interest annually. If you purchase...
Abner Corporation's bonds mature in 17 years and pay 14 percent interest annually. If you purchase the bonds for $1,225, what is your yield to maturity?
Solutions
Expert Solution
Solution
Calculation of yield to maturity(YTM)
Annual coupon=Face value*coupon rate
=$10000*14%=$140
YTM=[Annual coupon+(Face value-Purchase price)/Years to maturity]/(Face value+Purchase price)/2
=[$140+($1000-$1225)/17]/($1000+$1225)/2
=0.11395 or 11.395%
jeff jeffy answered 2 years agoRelated Solutions
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