Suppose the following bond quote for IOU Corporation appears in the financial pa

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, 2013. Company (Ticker):IOU (IOU) Coupon:9.90 Maturity:Apr 15,2024 Last Price:91.555 Last Yield:?? EST Vol (000s):1829

Requirement 1: What is the yield to maturity of the bond? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Yield to maturity ? %

Requirement 2: What is the current yield? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Current yield?

Explanation / Answer

yield to maturity = interest+(par value- marketprice)/years to maturity / (par value- marketvalue)/2

99+(1000-91.55)/11 / (1000+91.55)/2 = 33.2% approximate

current yield = interest/ market price =99/ 91.55 = 108.137%

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