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IceJOKER [234]
3 years ago
9

DMC Inc. Is planning to issue a $1,000 face value bond with an annual coupon rate of 10% that matures in 20 years. DMC is planni

ng to pay semiannual interest payments. Similar DMC bonds are quoting at 95% of par. What is yield to maturity for this bond?
Mathematics
1 answer:
creativ13 [48]3 years ago
3 0

Answer: 10.6%

Step-by-step explanation:

Given the following :

Face value (FV) = $1000

Coupon rate (C) = 10% paid semianually

Time to maturity = 20 years ; number of periods =( 20 * 2) = 40 (Semi-annual)

Current trading price of bond = 95% * 1000 = $950

Payment per period = (10%) / 2 * 1000 = 0.05 * 1000 = 50

Inputting the parameters above into the the yield to maturity calculator with semiannual payment,

Yield to maturity (YTM) = 10.6%

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