Question

In: Finance

Par value is $1,000. The bonds make semiannual payments and are currently selling at “106.” What is the bond’s current yield?

  1. JK Corp has 4.8 percent coupon bonds on the market with 13 years to maturity. Par value is $1,000. The bonds make semiannual payments and are currently selling at “106.” What is the bond’s current yield?

  2. Further to question #24, what is the bond’s yield-to-maturity?

Solutions

Expert Solution

1)

Annual coupon = 4.8% of 1000 = 48

Price = 106% of 1000 = 1060

Current yield = (Annual coupon / price) * 100

Current yield = (48 / 1060) * 100

Current yield = 4.53%

2)

Semi annual coupon = 48 / 2 = 24

Number of periods = 13 * 2 = 26

Yield to maturity = 4.20%

Keys to use in a financial calculator:

2nd P/Y 2

FV 1000

PV -1060

PMT 24

N 26

CPT I/Y

jeff jeffy answered 2 years ago
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