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ki77a [65]
3 years ago
7

Calculate the yield to maturity (YTM) for a one-year bond with a purchase price of $8,000, a face value of $10,000, and a curren

t yield of 10%. The yield to maturity is ____________
Business
1 answer:
Mazyrski [523]3 years ago
5 0

Answer:

yield to maturity YTM = 35%

Explanation:

given data

purchase price = $8,000

face value = $10,000

current yield = 10%

solution

we get here yield to maturity YTM

so first we get Annual Coupon by current yield that is express as

Current yield = annual coupon  ÷ current price   ..............1

put here value we get

Annual Coupon = 10 % ×  8,000

Annual Coupon = $800

now we get YTM by purchase price  that is  

purchase price = Annual Coupon ÷ ( 1+YTM ) + face value ÷ ( 1+YTM )  .......2

put here value we get

8,000 =  \frac{800}{1+YTM} +\frac{10000}{1+YTM}

solve it we get

yield to maturity YTM = 35%

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