6.85
6.92
7.19
7.26
2007-02-04 15:04:48 · 2 answers · asked by Anonymous in Business & Finance ➔ Corporations
If the investor purchased the bond at face value, the bonds YTM would equal its cupon rate (6.85).
Similarly, If the purchase price were different than face value - say less than 1000 (discount), you would know that the YTM would be greater than the cupon rate. If the bond is trading at a premium (greater than 1000), you would know the YTM is less than the cupon rate.
2007-02-04 15:56:07 · answer #1 · answered by WildCat Guy 2 · 0⤊ 1⤋
This question is easy if you happen to have a financial calculator. Me being the nerd I am happen to have one right here. The TI BA II - If you do a lot of these problems it is awesome. Type in:
P/Y = 2 (I am assuming it is semi-annual coupons)
N=40 (20 years/2 coupons per year)
PV = -953 (the present value or current price)
FV = 1000 (the future value or its maturity pay off)
PMT = 34.25 (payment or coupon, 6.85% of 1000 paid 1/2 at a time)
than press cpt (compute) and I/Y (interest per year) which will calculate the yield - 7.3%
2007-02-05 00:15:52 · answer #2 · answered by MagicalMke 4 · 0⤊ 0⤋