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There is a bond that has a quoted price of 105.957 and a par value of...

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Finance

There is a bond that has a quoted price of 105.957 and a parvalue of $2,000. The coupon rate is 6.90 percent and the bondmatures in 24 years. If the bond makes semiannual coupon payments,what is the YTM of the bond?

Multiple Choice

5.77%

3.21%

3.09%

4.81%

6.41%

Answer & Explanation Solved by verified expert
4.3 Ratings (545 Votes)

Par/Face value 2000
Annual Coupon rate 0.069
Annual coupon 138
semi-annual coupon 69
Present Value = Future value/[(1+(r/m))^mt]
r is the interest rate
m is the compounding period that is 2
mt is the time period.
price of the bond = sum of present values of future cash flows
price of the bond (105.957/100)*2000
price of the bond 2119.14
Use excel to find r
r/2 0.03205 r 0.0641
mt 1 2 3 4 5 6 7 8 9 10 46 47 48
future cash flow 69 69 69 69 69 69 69 69 69 69 69 69 2069
present value 66.85722591 64.781 62.76924 60.81996 58.93122 57.10112 55.32787 53.60968 51.94484 50.33171 16.16647 15.66442 455.1191
sum of present values 2119.26
The yield to maturity (YTM) of this bond is
6.41%.

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Transcribed Image Text

There is a bond that has a quoted price of 105.957 and a parvalue of $2,000. The coupon rate is 6.90 percent and the bondmatures in 24 years. If the bond makes semiannual coupon payments,what is the YTM of the bond?Multiple Choice5.77%3.21%3.09%4.81%6.41%

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