Question

XYZ Corporation’s bonds have 14 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%. The bonds sell at a price of $950. What is their yield to maturity? Show your work.

Answer 1

Answer:

The answer is 10.71%

Explanation:

N(Number of periods) = 14 years

I/Y(Yield to maturity) = ?

PV(present value or market price) = $950

PMT( coupon payment) = $100 ( 10 percent x $1,000)

FV( Future value or par value) = $1,000.

We are using a Financial calculator for this.

N= 14; PV= -950 ; PMT = 100; FV= $1,000; CPT I/Y= 10.71

Therefore, the yield to maturity of the bond is 10.71%