Yield to maturity (YTM) = [(C+(F-P)/n) / ((F+P)/2)]*100
Given:
Duration/term = n = 4 year
Interest rate or coupon= 4%
Price = P = 98
To find: Yield to maturity
Face value of the bond = F = 100
So, interest/C = 4% of 100= 4
Solution:
Yield to maturity (YTM) = [(C+(F-P)/n) / ((F+P)/2)]*100
Now, putting values in the formula,
[(4+(100-98)/4) / ((100+98)/2)]*100 Answer = 4.54% is the yield to maturity
