Harrimon Industries bonds have 6 years left to maturity Inte

Harrimon Industries bonds have 6 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

$736? Round your answer to two decimal places.

$1,102? 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+(1000-736)/6]/(1000+736)/2

which is equal to

=14.97%(Approx).

1.Approx YTM=[80+(1000-1102)/6]/(1000+1102)/2

which is equal to

=5.93%(Approx).