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In: Finance

scott motors has a bond issue outstanding that pays an 8.50% coupon rate and matures in...

scott motors has a bond issue outstanding that pays an 8.50% coupon rate and matures in 16.5 years. the bonds have a par value of 1,000 and a market price of $944.30. interest is paid semi annually. what is the yield to maturity? Please show me how to do this on financial calculator (BA 2 plus) and details about how you got the numbers. thank you!

Solutions

Expert Solution

                  K = Nx2
Bond Price =∑ [(Semi Annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^Nx2
                   k=1
                  K =16.5x2
944.3 =∑ [(8.5*1000/200)/(1 + YTM/200)^k]     +   1000/(1 + YTM/200)^16.5x2
                   k=1
YTM% = 9.16

on ba2 plus

PV = -944.3

FV = 1000

N = 16.5*2=

PMT = 8.5*1000/(2*100) = 42.5

CMT I/Y

multiply the result by 2 and you will get 9.16%

not: we are multiplying and dividing certain items by 2 because of semi annual coupon payment

jeff jeffy answered 1 year ago
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