Harrimon Industries bonds have 4 years left to maturity Inte

Harrimon Industries bonds have 4 years left to maturity. Interest is paid annually, and the bonds have a $1,000 par value and a coupon rate of 8%.

What is the yield to maturity at a current market price of

$810? Round your answer to two decimal places.
   %

$1,070? Round your answer to two decimal places.
   %

Solution

Annual coupon=$1000*8%=$80

Approx YTM=[Annual coupon+(Face value-Present value)/time to maturity]/(Face value+Present value)/2

1.Approx YTM=[80+(1000-810)/4]/(1000+810)/2

which is equal to

=14.60%(Approx).

2.Approx YTM=[80+(1000-1070)/4]/(1000+1070)/2

which is equal to

=5.98%(Approx).