Answer: The YTM is 37.97%.
YTM or yield-to -maturity is that discount rate that equates the purchase price pr present value with the value that is to be received after a fixed time period (Future Price).
We use the following formula to find the YTM
[tex]\mathbf{FV = PV (1+r)^{n}}[/tex]
Substituting the values in the equation above we get,
[tex]\mathbf{10,000 = 2,000 (1+r)^{5}}[/tex]
We need to solve for r in the equation above to arrive at the YTM
[tex]\mathbf{\frac{10,000}{2,000} = (1+r)^{5}}[/tex]
[tex]\mathbf{5 = (1+r)^{5}}[/tex]
Taking the 5th root on both sides we get,
[tex]\mathbf{\sqrt[5]{5} = (1+r)}[/tex]
[tex]\mathbf{1.379729661 = (1+r)}[/tex]
[tex]\mathbf{r = 1.379729661 -1 = 0.379729661}[/tex]
