1 Calculate the yield to maturity on the following bonds A A

1- Calculate the yield to maturity on the following bonds:

A- A 8.6 percent coupon (paid semiannually) bond, with a $1,000 face value and 10 years remaining to maturity. The bond is selling at $915.

B- An 5.7 percent coupon (paid quarterly) bond, with a $1,000 face value and 10 years remaining to maturity. The bond is selling at $911.

C- An 7.7 percent coupon (paid annually) bond, with a $1,000 face value and 8 years remaining to maturity. The bond is selling at $1,061.

  
(For all requirements, do not round intermediate calculations. Round your answers to 3 decimal places. (e.g., 32.161))

a.	Yield to maturity		% per year
b.	Yield to maturity		% per year
c.	Yield to maturity

Solution

a.

Yield to maturity

9.962%

Per year

b.

Yield to maturity

6.942%

Per year

c.

Yield to maturity

6.691%

Per year

Working:

Using financial calculator BA II Plus - Input details:

a.

FV = Future Value =

-$1,000.00

PV = Present Value =

$915.00

N = Total number of periods = Years x frequency =

20

PMT = Payment = Coupon / frequency =

-$43.00

CPT > I/Y = Rate or YTM =

4.9810

Convert Yield in annual and percentage form = Yield*2 / 100 =

9.962%

Using financial calculator BA II Plus - Input details:

b.

FV = Future Value =

-$1,000.00

PV = Present Value =

$911

N = Total number of periods = Years x frequency =

40

PMT = Payment = Coupon / frequency =

-$14.25

CPT > I/Y = Rate or YTM =

1.7354

Convert Yield in annual and percentage form = Yield*4 / 100 =

6.942%

Using financial calculator BA II Plus - Input details:

c.

FV = Future Value =

-$1,000.00

PV = Present Value =

$1,061

N = Total number of periods = Years x frequency =

8

PMT = Payment = Coupon / frequency =

-$77.00

CPT > I/Y = Rate or YTM =

6.6907

Convert Yield in annual and percentage form = Yield*1 / 100 =

6.691%

a.	Yield to maturity	9.962%	Per year
b.	Yield to maturity	6.942%	Per year
c.	Yield to maturity	6.691%	Per year