question archive A Japanese company has a bond outstanding that sells for 87 percent of its #100,000 par value
A Japanese company has a bond outstanding that sells for 87 percent of its #100,000 par value
Subject:FinancePrice:2.87 Bought7
A Japanese company has a bond outstanding that sells for 87 percent of its #100,000 par value. The bond has a coupon rate of 4.6 percent paid annually and matures in 17 years. What is the yield to maturity of this bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Yield to maturity
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Answer:
Current price=100,000*87%=87,000
Annual coupon=100,000*4.6%=4600
Approx Yield to maturity=[Annual coupon+(Face value-Present value)/time to maturity]/(Face value+Present value)/2
=[4600+(100,000-87000)/17]/(100,000+87000)/2
=5.83%(Approx)
