A 30-year maturity bond with face value of $1,000 makes semiannual coupon paymen

Question

A 30-year maturity bond with face value of $1,000 makes semiannual coupon payments and has a coupon rate of 8.8%. (Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal places.)

a. What is the yield to maturity if the bond is selling for $960?

Yield to maturity % __________

b. What is the yield to maturity if the bond is selling for $1,000?

Yield to maturity % ____________

c. What is the yield to maturity if the bond is selling for $1,125?

Yield to maturity % _____________

Explanation / Answer

a) YTM={ C+[ F-P/n]/F+P/2} C=coupon rate =8.8% F=face value =$ 1000 P=price =$ 960 n=years =30

8.8+(1000-960/30)/1000+960/2

8.8+40/30)/1960/2 => 8.8+1.33/980 => 10.13/980=0.01033 or 1.034

b) YTM = 8.8+(1000-1000/30)/1000+1000/2

8.8+(0/30 )/2000/2 => 8.8/1000=0.0088 or 0.88%

c) YTM = 8.8+ (1000-1125/30)/ 1000+1125/2

8.8+(-125/30)/2125/2 => 8.8-4.17/1062.50 => 4.635/1062.50 =0.0043 or 0.44%

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