Rolling Company bonds have a coupon rate of 4.60 percent, 17 years to maturity,

Question

Rolling Company bonds have a coupon rate of 4.60 percent, 17 years to maturity, and a current price of $1,116. What is the YTM? The current yield? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Rolling Company bonds have a coupon rate of 4.60 percent, 17 years to maturity, and a current price of $1,116. What is the YTM? The current yield? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Explanation / Answer

YTM of Rolling Company=( FV/CMP)^(1/no of years to maturity)-1

Assumed Face Value as $ 1000

Current Market Price= $ 1116 coupon rate =4.60% year to maturity=17 y

YTM= C+ F-P/n)/F+P/2

4.60+1000-1116/17)/ 1000+1116/2

4.60+ (-)116/17) /2116/2

4.60-6.823/1058 => -0.21%

current yield= Annual cash flow/Market price

4.60/1116 =0.00412 or 0.412%

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