Question

Bare trees United issued 20 year bonds 3 years ago at a coupon rate of 8.5 percent. The bondsmake semiannual payments. If these bonds currently sell for 91.4 percent of par value, what is the YTM?

Answer 1

Answer:

The YTM is 9.47 %.

Explanation:

Bond Prices in most countries are expressed per $100 nominal. We will use this Nominal to calculate the Yield to Maturity (YTM) of this bond as follows :

Pv = $91.40

n = 20 × 2 = 40

Pmt = ($100 × 8.50 %) ÷ 2 = -$4.25

P/yr = 2

FV = -$100

YTM = ?

Using a Financial Calculator, the YTM is 9.4660 or 9.47 %