A bond with a face value of 1000 has 16 years until maturity

A bond with a face value of $1,000 has 16 years until maturity, carries a coupon rate of 5.8%, and sells for $1,109.

What is the yield to maturity if interest is paid semiannually? (Do not round intermediate calculations. Enter your answer as a percent rounded to 4 decimal places.)

Solution

Number of periods = 16 * 2 = 32 ( since it is a a semi annual bond, we multiply by 2)

Coupon payment = 0.058 * 1000 = 58 / 2 = 29

Yield to maturity using a financial calculator = 4.8152%

Keys to use in a financial calculator:

2nd I/Y 2

PMT 29

N 32

FV 1000

PV -1109

CPT I/Y