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)?

Solutions

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 1 year ago

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