Calculation of yield to maturity:
Yield to maturity = (C + ((F-P)/n))*2 / ((F+P)/2)
F = Face value = $ 1000
C = Semiannual Coupon Payment = Face value * Coupon rate = $1000*3% = $30
P = Price = $875
n = number of semiannual = 10 years *2 = 20 Semiannual
Yield to maturity = (30 + ((1000-875)/20))*2 / ((1000+875)/2)
= (30 + 6.25)*2 / 937.50
= 72.50 / 937.50
= 0.077333
= 7.73 %
You purchase a bond for $875. It pays $60 a year (semiannual coupon is 3%),
&the bond matures after 10 years. What is the yield to maturity?
2 answers
thank you very much