question archive An 8% annual coupon bond matures in 5 years
An 8% annual coupon bond matures in 5 years
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An 8% annual coupon bond matures in 5 years. The bond has a face value of $1,000 and a current yield of 8.21%. What is the bond's current price and yield to maturity (YTM)?
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1)Use calculator
CURRENT YIELD = ANNUAL COUPAN PAYMNET/ CURRENT BOND PRICE
8.21% = 80 / CURRENT BOND PRICE
CURRENT BOND PRICE = $974.4214
2)
Use calculator
FV= 1000
PMT= 8% X 1000 = 80
N = 5
PV = - 974.4214
COMPUTE 1/Y = YTM = 8.6517%
