Question

Footsteps Co. has a bond outstanding with a coupon rate of 5.7 percent and annual payments. The bond currently sells for $927.87, matures in 13 years, and has a par value of $1,000. What is the YTM of the bond?

Answer 1

Answer:

6.54%

Explanation:

YTM which is Year to Maturity, is the yield of a bond if it is held till maturity.

$\frac{Annual interest + Par value - Market value/Number of years}{Par value + market value/2\\}$

Formula for YTM

Annual interest = 1000*0.57=57

Par value $1000

Market value $927.87

YTM= $\frac{57+ (1000-927.87)/13}{1000+927.87/2}$

YTM= 6.54%