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A bond that matures in 6 years has an 8 percent coupon rate,semiannual payments, a...

A bond that matures in 6 years has an 8 percent coupon rate, semiannual payments, a face value of $1,000, and a 7.7 percent current yield. What is the bond’s nominal yield to maturity (YTM)?

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Expert Solution

We will use the financial calculator to compute the YTM. First, we will compute the current market price

Current market yield = Annual coupon payment/ Current price of the bond

7.7% = $80/ Current price of the bond

Current price of the bond = $1038.96 or approx. $1039

FV = $1000

PV = $1039

N = 12 (converted into semi annual periods)

PMT = $40 (converted into semi annual payments)

YTM = 7.2%

jeff jeffy answered 3 years ago
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