The yield to maturity for this bond is 2.33%.
What do you mean by yield to maturity?
The yield to maturity is the total return anticipated on a bond if the bond is held until it matures. It is the internal rate of return of an investment in a bond. It takes into account the current price of the bond, the face value of the bond, the annual coupon payments, and the time remaining until maturity. A bond's yield to maturity is an important factor to consider when evaluating the attractiveness of a bond investment.
To calculate the yield to maturity (YTM) for a bond, we can use the following formula:
YTM = (C + (F - P) / n) / ((F + P) / 2)
Where:
C is the annual coupon payment (8% of the face value of the bond)
F is the face value of the bond (also known as the par value)
P is the price of the bond ($970.00)
n is the number of years to maturity (2 years)
Plugging these values into the formula, we get:
YTM = (8 + (1000 - 970) / 2) / ((1000 + 970) / 2)
= (8 + 30 / 2) / (1970 / 2)
= (8 + 15) / 985
= 23 / 985
= 2.33%
Hence, the yield to maturity for this bond is 2.33%.
To learn more about yield to maturity from the given link:
https://brainly.com/question/29360027
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