Question

Suppose you are given the following bond quote information: Time to maturity: 15 years

Coupon rate: 8.375%

Price: 93.5% of par

Par Value: $1,000

Assuming annual compounding, calculate the yield to maturity on the bond. (Enter percentages as decimals and round to 4 decimals)

Please show work.

Answer 1

Year	Cash flow	PV factor @ 8%	PV @8%	PV factor @ 10%	PV @10%
0	(935)	1.000	(935)	1.000	(935)
1	84	0.926	78	0.909	76
2	84	0.857	72	0.826	69
3	84	0.794	66	0.751	63
4	84	0.735	62	0.683	57
5	84	0.681	57	0.621	52
6	84	0.630	53	0.564	47
7	84	0.583	49	0.513	43
8	84	0.540	45	0.467	39
9	84	0.500	42	0.424	36
10	84	0.463	39	0.386	32
11	84	0.429	36	0.350	29
12	84	0.397	33	0.319	27
13	84	0.368	31	0.290	24
14	84	0.340	29	0.263	22
15	84	0.315	26	0.239	20
15	1,000	0.315	315	0.239	239
		NPV	97		(59)
	YTM	=Lower rate + Difference in rates*(NPV at lower rate)/(Lower rate NPV-Higher rate NPV)
		=8%+2%*(97/(97+59)
		9.24%