Suppose the following bond quotes for lOU Corporation appear in the financial pa

Question

Suppose the following bond quotes for lOU Corporation appear 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. (Do not round intermediate calculations. Round the final answers to 2 decimal places.) mpany EST Vol (Ticker) Coupon Maturity Last Price Last Yield EST Spread UST (000s) 1,877 OU (IOU) 6.8 Apr 15, 2026 108.02 476 10 What is the yield to maturity of the bond? YTM What is the Equivalent Government Bond Yield? Bond yield

Explanation / Answer

use financial calculator

FV=1000

PV=-1000*108.02%=-1080.20

N=10*2=20 semi annual periods

PMT=1000*6.8%/2=34

Click CPT

Click 1/Y=2.8675% per semi annual

yield to maturity=2.8675%*2=5.7350% or 5.74%

Equivalent government bond yield=(1080.20-1000)/1080.20=7.42%

the above is the answer

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