Suppose the following bond quote for IOU Corporation appears in the financial pa

Question

Suppose the following bond quote for IOU Corporation appears in the financial page of today’s newspaper. Assume the bond has a face value of $1,000 and the current date is April 15, 2012.

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

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

Suppose the following bond quote for IOU Corporation appears in the financial page of today’s newspaper. Assume the bond has a face value of $1,000 and the current date is April 15, 2012.

Explanation / Answer

PV = 1,031.6

Coupon Rate = 6.8%

Semi Annual Coupon Rate = 3.4%

Semi Annual Coupon payment = 34

N = 16 years

Number of Semi Annual Periods = 16 * 2 = 32

FV = 1,000

Using Financial Calculator:

r = 3.239910

YTM = 2 * 3.239910

YTM = 6.48%

Part B:

Current Yield = Annual Coupon Payment/ Current Price

Current Yield = 68/ 1,031.6

Current Yield = 6.59%

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