Suppose the following bond quotes for IOU Corporation appear in the financial pa

Question

Suppose the following bond quotes for IOU Corporation appear in the financial page of today’s newspaper. Assume the bond has a face value of $2,000 and the current date is April 19, 2015.

What is the yield to maturity of the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

What is the current yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Suppose the following bond quotes for IOU Corporation appear in the financial page of today’s newspaper. Assume the bond has a face value of $2,000 and the current date is April 19, 2015.

Explanation / Answer

Answer:

YTM of the bond using financial calculator:

FV = $2,000, PV = $2,000*(104.66/100) = $2,093.2

N = 13 years,Coupon = PMT = $2,000*7.8% = $156

YTM = CPT I/Y = 7.23% (ans)

Current yield = PMT/PV = $156/$2,093.2 = 7.45% (ans)

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