A bond is selling for 95% of par and has an annual coupon rate of 6% and will mature in five years. There are semi-annual coupon
1 answer:
Based on the selling price, the coupon rate, and the period, the yield to maturity will be <u>7.2%. </u>
<h3>What is the yield to maturity?</h3>This can be found using a financial calculator or Excel worksheet.
Face value = 95% x 1,000
= $950
Coupon amount = 1,000 x 6% / 2 semi annual periods per year
= $30
Period = 5 years x 2
= 10 semi annual periods
Yield to maturity is = 3.6%
Annual yield to maturity:
= 3.6% x 2
= 7.2%
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