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?(Yield to maturity?) Assume the market price of a 7?-year bond for Margaret Inc. is ?$900?,...

?(Yield to maturity?) Assume the market price of a 7?-year bond for Margaret Inc. is ?$900?, and it has a par value of $ 1,000. The bond has an annual interest rate of 7?% that is paid semiannually. What is the yield to maturity of the? bond?

Solutions

Expert Solution

YTM = The rate at which PV of Cash Inflows are equal to Bond price.

YTM = Rate at which least +ve NPV + [ NPV at that rate / change in NPV due to inc in rate by 0.5% ] * 0.5%

= 4% + [ 47.18 / 49.41 ] * 0.5%

= 4% + 0.48%

= 4.48%

YTM per anum = 4.48% * 2

= 8.96%

jeff jeffy answered 2 years ago
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