Question

Footsteps Co. has a bond outstanding with a coupon rate of 6.4 percent and annual payments. The bond currently sells for $956.08, matures in 20 years, and has a par value of $1,000. What is the YTM of the bond? a. 6.81% b. 6.69% c. 6.13% d. 5.67% e. 6.40%

Answer 1

Answer:

The answer is A.

Explanation:

Yield-to-maturity is the rate of return an investor is expecting from his bonds.

Number of years (N) - 20 years

Yield-to-maturity(YTM) - ?

Present Value(price of bond) = $956.08

Future Value(FV) = $1,000

Payment Coupon(PMT) = $64(6.4% x $1000)

Using a Financial calculator, the Yield-to-maturity (YTM)

= 6.81%