A 25-year maturity bond with face value of $1,000 makes semi annual coupon payme

Question

A 25-year maturity bond with face value of $1,000 makes semiannual coupon payments and has a coupon rate of 8%.

What is the bonds yield to maturity if the bond is selling for $960? Enter annual yield to maturity as your answer. (Do not round intermediate calculations. Round your answer to 3 decimal places.)

What is the bonds yield to maturity if the bond is selling for $1,160? Enter annual yield to maturity as your answer. (Do not round intermediate calculations. Round your answer to 3 decimal places.)

A 25-year maturity bond with face value of $1,000 makes semiannual coupon payments and has a coupon rate of 8%.

Explanation / Answer

a. coupon paymemt =8%*1000/2= $40

Let YTM be r

Price = 960

Period = 25*2 = 50

960 = 40/(1+r/2) + 40/(1+r/2)^2 + 40/(1+r/2)^3 ...........1040/(1+r/2)^50

YTM = 8.385%

b.if the bond is selling for $1,000 then YTM = Coupon rate

Annual yield to maturity = 8.000%

c. Price = 1160

1160== 40/(1+r/2) + 40/(1+r/2)^2 + 40/(1+r/2)^3 ...........1040/(1+r/2)^50

YTM = 6.675%

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