Broke Benjamin Co. has a bond outstanding that makes semiannual payments with a coupon rate of 5.2 percent. The bond sells for $

Question

3 years ago

7

945.32 and matures in 16 years. The par value is $1,000. What is the YTM of the bond

1 answer:

marin [14] · Answer 1 · 2021-12-13T23:00:34+03:00

Answer:

The correct answer is 5.72%.

Explanation:

According to the scenario, the given data are as follows:

Coupon rate = 5.2%

Coupon rate (semiannual) = 2.6%

par value (FV)= $1,000

Coupon payment(pmt) = $1,000 × 2.6% = $26

Time period = 16 years

Time period ( semi annual) (Nper)= 32

Sell value ( PV) = $945.32

So, we can calculate the rate by using financial calculator.

Attachment is attached below

So, YTM Semiannual= 0.02863 or 2.86%

And YTM annual = 2.86% × 2 = 5.72%