Question

Alice trang is planning to buy a six-year bond that pays a coupon of 10 percent semiannually. given the current price of $878.21, what is the yield to maturity on these bonds? (round to the closest answer.)

Answer 1

Given that the coupon rate is 10%  p.a , given that the coupon is paid semi-annually, then the semi annual rat will be:
10/2=5%
hence the amount paid will be:
5/100×879.21
=$43.7605
hence the yield will be given by:
yield=(coupon)/(market price of bond)
43.7605/876.21
=0.04884%~0.05%