Rolling Company bonds have a coupon rate of 6.40 percent, 24 years to maturity,
ID: 2773194 • Letter: R
Question
Rolling Company bonds have a coupon rate of 6.40 percent, 24 years to maturity, and a current price of $1,206. 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 6.40 percent, 24 years to maturity, and a current price of $1,206. 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
Approximate Yield-to-Maturity Percentage
=
Annual Interest Payment + (Par Value - Bond Price)/Number of Years until Maturity
(Par Value + Bond Price)/2
Annual Interest = $64
Par value =$1000
Current price $1206
Years to maturity=24 years
YTM= [64+(1206-1000)/24 ]/(1206+1000)/2
=72.58/1103
=6.58%
Current yield = Annual Interest payment/ Current price=64/1206 =5.30%
So, YTM = 6.58%
Current Yield = 5.3%
Approximate Yield-to-Maturity Percentage
=
Annual Interest Payment + (Par Value - Bond Price)/Number of Years until Maturity
(Par Value + Bond Price)/2
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