An investor is considering purchasing a bond with a 9.61 percent coupon interest

Question

An investor is considering purchasing a bond with a 9.61 percent coupon interest rate, a par value of $1,000, and a market price of $962.95 The bond will mature in nine years. Based on this information, answer the following questions: a. What is the bond's current yield? b. What is the bond's approximate yield to maturity? c. What is the bond's yield to maturity using a financial calculator? Note: Assume coupon payments are paid annualy a. The bond's current yield is%. (Round to two decimal places)

Explanation / Answer

a. Bond's Current yield = Coupon/Market Price = 96.1/962.95 = 9.98%

b. Approx YTM = [C + (F-P)/n] / [(F+P)/2] = [96.1 + (1,000-962.95)/9] / [(1,000+962.95)/2] = 10.21%

c. Bond's YTM using a financial calculator = 10.26%

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.