Suppose the following bond quote for IOU Corporation appears in the financial pa
ID: 2619159 • Letter: S
Question
Suppose the following bond quote for IOU Corporation appears in the financial page of today’s newspaper. Assume the bond has a face value of $1,000, and the current date is April 15, 2016.
What is the yield to maturity of the bond? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Yield to maturity %
What is the current yield? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Current yield
how do i solve this?
Company(Ticker) Coupon Maturity Last
Price Last
Yield EST Vol
(000s) IOU (IOU) 7.70 Apr 15, 2039 91.705 ?? 1,844
Explanation / Answer
Yield to Maturity = 8.53%
Using financial calculator BA II Plus - Input details:
#
FV = Future Value =
$1,000
PV = Present Value of Bond = 91.705% x -FV =
-$917.05
N = Total number of remaining payment periods =
23
PMT = Payment = Coupon =
$77.00
CPT > I/Y = Rate =
8.5349
Convert Yield in annual and percentage form = Yield / 100 =
8.53%
Current Yield = 8.40%
Current yield = Coupon / Present value of bond = 77 / 917.05 =
8.40%
Using financial calculator BA II Plus - Input details:
#
FV = Future Value =
$1,000
PV = Present Value of Bond = 91.705% x -FV =
-$917.05
N = Total number of remaining payment periods =
23
PMT = Payment = Coupon =
$77.00
CPT > I/Y = Rate =
8.5349
Convert Yield in annual and percentage form = Yield / 100 =
8.53%
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