If you pay 900 for purchasing a 525 coupon bond with 6 years

If you pay $900 for purchasing a 5.25% coupon bond, with 6 years remaining to maturity, with par value of $1000, what would be your yield to maturity?

Solution

YTM is the rate which makes the present value of all the future coupon and maturity value equal to the current price

Thus 900=52.5/(1+r)+52.5/(1+r)^2+52.5/(1+r)^3+52.5/(1+r)^4+52.5/(1+r)^5+52.5/(1+r)^6+1000/(1+r)^6

=r=7.37%