Question

What is the yield to maturity of a five-year, $10,000 bond with a 4.8% coupon rate and semiannual coupons if this bond is currently trading for a price of $9,546?

		7.03%
		5.86%
		8.21%
		2.93%

Answer 1

Given,

Par value = $10000

Coupon rate = 4.8%

Years to maturity = 5 years

Current price = $9546

Solution :-

Semi annual coupon payment = $10000 x 4.8% x 1/2 = $240

Semi annual maturity = 5 years x 2 = 10

So, we have,

PV = -9546

FV = 10000

NPER = 10

PMT = 240

Yield to maturity = 2.93% x 2 = 5.86%

Thus, yield to maturity is 5.86%