question archive The BondsCanBeFun Company has 12 year, $1,000 par value, 6% coupon (paid annually) bonds currently selling at $849
The BondsCanBeFun Company has 12 year, $1,000 par value, 6% coupon (paid annually) bonds currently selling at $849
Subject:FinancePrice:2.87 Bought7
The BondsCanBeFun Company has 12 year, $1,000 par value, 6% coupon (paid annually) bonds currently selling at $849.28.
What is the yield to maturity (YTM) of this bond?
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
Answer:
YTM is the rate at which PV of cash Inflows are equal to Price of Bond
| Year | CF | PVf @8% | Disc CF |
| 1 | $ 60.00 | 0.925926 | $ 55.56 |
| 2 | $ 60.00 | 0.857339 | $ 51.44 |
| 3 | $ 60.00 | 0.793832 | $ 47.63 |
| 4 | $ 60.00 | 0.73503 | $ 44.10 |
| 5 | $ 60.00 | 0.680583 | $ 40.83 |
| 6 | $ 60.00 | 0.63017 | $ 37.81 |
| 7 | $ 60.00 | 0.58349 | $ 35.01 |
| 8 | $ 60.00 | 0.540269 | $ 32.42 |
| 9 | $ 60.00 | 0.500249 | $ 30.01 |
| 10 | $ 60.00 | 0.463193 | $ 27.79 |
| 11 | $ 60.00 | 0.428883 | $ 25.73 |
| 12 | $ 60.00 | 0.397114 | $ 23.83 |
| 12 | $ 1,000.00 | 0.397114 | $ 397.11 |
| PV of Cash Inflows | $ 849.28 | ||
Thus YTM is 8%
