Question

West Corp. issued 13-year bonds 2 years ago at a coupon rate of 9.4 percent. The bonds make semiannual payments. If these bonds currently sell for 98 percent of par value, what is the YTM?

Answer 1

Since bond was issued 2 year before so remaining term for the bond is 13-2=11 years
	Frequency in a year	2
	YTM
	Coupon rate	9.40%
	Face value	$       1,000
	Coupon payment	$       47.00	=1000*9.4%/2
	Years to maturity	11
	No. of periods	22
	Purchase price	$     980.00	1000*98%
		4.00%						5.00%
Year	Cash Flow	PV factor = 1/ (1+r)^t	PV					PV factor = 1/ (1+r)^t	PV
0	$                  (980.00)	1.000	$        (980)					1.000	$ (980.00)
1	$                      47.00	0.962	$            45					0.952	$    44.76
2	$                      47.00	0.925	$            43					0.907	$    42.63
3	$                      47.00	0.889	$            42					0.864	$    40.60
4	$                      47.00	0.855	$            40					0.823	$    38.67
5	$                      47.00	0.822	$            39					0.784	$    36.83
6	$                      47.00	0.790	$            37					0.746	$    35.07
7	$                      47.00	0.760	$            36					0.711	$    33.40
8	$                      47.00	0.731	$            34					0.677	$    31.81
9	$                      47.00	0.703	$            33					0.645	$    30.30
10	$                      47.00	0.676	$            32					0.614	$    28.85
11	$                      47.00	0.650	$            31					0.585	$    27.48
12	$                      47.00	0.625	$            29					0.557	$    26.17
13	$                      47.00	0.601	$            28					0.530	$    24.93
14	$                      47.00	0.577	$            27					0.505	$    23.74
15	$                      47.00	0.555	$            26					0.481	$    22.61
16	$                      47.00	0.534	$            25					0.458	$    21.53
17	$                      47.00	0.513	$            24					0.436	$    20.51
18	$                      47.00	0.494	$            23					0.416	$    19.53
19	$                      47.00	0.475	$            22					0.396	$    18.60
20	$                      47.00	0.456	$            21					0.377	$    17.71
21	$                      47.00	0.439	$            21					0.359	$    16.87
22	$                      47.00	0.422	$            20					0.342	$    16.07
22	$                 1,000.00	0.422	$          422					0.342	$ 341.85
		Total	$          121					Total	$   (19.49)
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