Trincor Company bonds have a coupon rate of 10.25percent, 14 years to maturity, and a...

Trincor Company bonds have a coupon rate of 10.25 percent, 14 years to maturity, and a current price of $1,225. What is the YTMThe current yield?

Solutions

Expert Solution

a. The yield to maturity is computed as follows:

Plug the below variables in the financial calculator as follows:

FV = 1,000

PV = - 1,225

PMT = 102.5 (10.25% x 1,000)

N = 14

Finally press CPT and then I/Y. It will give I/Y equal to 7.59% Approximately

You can also use the below excel as follows:

= RATE(N,PMT,PV,FV)

= RATE(14,102.5,-1225,1000)

It will also give I/Y equal to 7.59%

b. Current yield is computed as follows:

= Coupon payment / current price

= $ 102.5 x / $ 1,225

= 8.37% Approximately

jeff jeffy answered 2 years ago

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