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, 2016. Company (Ticker) Coupon Maturity Last Price Last Yield EST Vol (000s) IOU (IOU) 9.95 Apr 15, 2025 91.565 ?? 1,830 What is the yield to maturity of the bond? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Yield to maturity % What is the current yield? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Current yield %

Explanation / Answer

Coupon Rate = 9.95%

Time to Maturity = 9 years

Semi Annual Periods to Maturity = 18

Last Price = 91.565%

FV = 1,000

PV = 915.65

Semi Annual Coupoon Rate = 9.95%/2 = 4.975%

Semi Annual Coupoon Payment = 4.975% * 1,000 = 49.75

Using Financial Calculator:

r = 5.738820

YTM = 11.48%

Current Yield = 99.5/ 915.65

Current Yield = 10.87%

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