The bond that pays $64 in annual interest, with a face value of $1,000 and a current market price of $1,021.61, has a yield to maturity is 0.38%.
What is the yield to maturity?
The yield to maturity is the discount rate at which the present value of a bond's future cash flows equals its current price.
The yield to maturity can be computed using the formula below:
Data and Calculations:
Annual interest = $64
Face value = $1,000
Current Market Price = $1,021.61
Maturity Period = 11 years
Yield to Maturity = [Annual Interest + {(FV-Price)/Maturity}] / [(FV+Price)/2]
Annual Interest = Annual Interest Payout by the Bond.
FV = Face Value of the Bond.
Price = Current Market Price of the Bond.
Maturity = Time to Maturity i.e. number of years till Maturity of the Bond.
= [$64 + {($1,000 - $1,021.61)/11}] / [($1,000+$1,021.61)/2]
= {$64 - $21.61/11} / {$2,021.61/2}
= ($42.39/11) / $1,010.805
= $3.854/$1,010.805
= 0.38%
Thus, the bond's yield to maturity is 0.38%.
Learn more about bonds at https://brainly.com/question/25596583
