Homework SourseSuppose the following bond quote for IOU Corporation appears
Suppose the following bond quote for IOU Corporation appears in the financial page of today’s newspaper. Assume the bond has a face value of $1,000 and the current date is April 15, 2016.
What is the yield to maturity of the bond? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
YTM %
What is the current yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Current yield %
| Company (Ticker) | Coupon | Maturity | Last Price | Last Yield | EST Vol (000s) | ||||||||||||||
| IOU (IOU) | 6.6 | Apr 15, 2029 | 103.065 | ?? | 1,829 | ||||||||||||||
Solution
1)
Coupon payment = 0.066 * 1000 = 66
Price = 103.065% of 1000 = 1,030.65
years to maturity = 13
Yield to maturity using a financial calculator = 6.25%
Keys to use in a financial calculator: PV = -1030.65, FV = 1000, PMT = 66, N = 13, CPT I/Y
2)
Current yield = annual coupon / Price
Current yield = 66 / 1030.65
Current yield = 0.064037 or 6.40%
