A bond sells for $894.17 and has a coupon rate of 6.20 percent. If the bond has

Question

A bond sells for $894.17 and has a coupon rate of 6.20 percent. If the bond has 13 years until maturity, what is the yield to maturity of the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

A bond sells for $894.17 and has a coupon rate of 6.20 percent. If the bond has 13 years until maturity, what is the yield to maturity of the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Explanation / Answer

Assume face value be $1000

Yield = [Interest + (face value -price) /years ] /[(face value +price)/2]

        = [ 62 + (1000 - 894.17) / 13] /[(1000 + 894.17)/2]

        = [62 + (105.83/ 13) ] /[1894.17/2]

        = [62 + 8.1408 ] / 947.085

      = 70.1408 / 947.085

     = .0741 or 7.41%

**Interest = 1000 *.062 = 62

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