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?
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?
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
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