Question

Broke Benjamin Co. has a bond outstanding that makes semiannual payments with a coupon rate of 6 percent. The bond sells for $981.45 and matures in 24 years. The par value is $1,000. What is the YTM of the bond

Answer 1

Answer:

YTM = 6.13%

Explanation:

As we know that: YTM = [C +(F-P/n) ] / (F+ P) / 2

where C= Coupon payment = 1000 * 6% = $60.

F = face value of bond = $1000

P= Price of bond = $ 981.45

n= Years to maturity = 24 years

                 Solution:

                YTM =   60 +[ (1000-981.45) / 24] /  (1000+981.45) / 2

                        =( 60 + .7729) / 990.72

                         =  60.7729 / 990.72

                        = 6.13%