Bonds issued by the Coleman Manufacturing Company have a par value of $1,000, which is also...

Bonds issued by the Coleman Manufacturing Company have a par value of $1,000, which is also the amount of principal to be paid at maturity. The bonds are currently selling for $770. They have 10 years to maturity. Annual interest is 14 percent ($140), paid semiannually.

Compute the yield to maturity. (Do not round intermediate calculation. Use a Financial calculator to arrive at the answers. Round the final answer to 2 decimal places.)

Yield to maturity %

Expert Solution

Yield to maturity of (YTM) of the Bond

The Yield to maturity of (YTM) of the Bond is calculated using financial calculator as follows (Normally, the YTM is calculated either using EXCEL Functions or by using Financial Calculator)


Variables	Financial Calculator Keys	Figure

Face Value [$1,000]	FV	1,000
Coupon Amount [$1,000 x 14% x ½]	PMT	70
Yield to Maturity [YTM]	1/Y	?
Time to Maturity [10 Years x 2]	N	20
Bond Price [-$770]	PV	-770

We need to set the above figures into the financial calculator to find out the Yield to Maturity of the Bond. After entering the above keys in the financial calculator, we get the semi-annual yield to maturity (YTM) on the bond = 9.635%

The semi-annual Yield to maturity = 9.635%

Therefore, the annual Yield to Maturity = 19.27% [9.635% x 2]

“Hence, the Yield to maturity of (YTM) of the Bond will be 19.27%”

ekkarill92 answered 8 hours ago

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