Question

Crossfade Corp. has a bond with a par value of $2,000 that sells for $1,956.84. The bond has a coupon rate of 6.84 percent and matures in 24 years. If the bond makes semiannual coupon payments, what is the YTM of the bond

Answer 1

Answer:

Semestral rate= 3.51%

Annual rate= 7.02%

Explanation:

Giving the following information:

Par value= $2,000

Present value= $1,956.84

Coupon= (0.0684/2)*2,000= $68.4

Number of periods= 24*2= 48 semesters

To calculate the YTM, we need to use a financial calculator:

Function= CMPD

n= 48

I%= SOLVE = 3.51%

PV= 1,956.84

PMT= -68.4

FV= -2,000

Semestral rate= 3.51%

Annual rate= 3.51*2= 7.02%