A bond is traded at a price of 1040 and has a par value of 1

A bond is traded at a price of $1,040 and has a par value of $1,000. The annual coupon is $65 annual coupon and has a 15-year maturity. What is the yield to maturity (YTM)? (Show all your work)

Solution

Par Value = $1,000
Current Price = $1,040
Annual Coupon = $65
Time to Maturity = 15 years

Let Annual YTM be i%

$1,040 = $65 * PVIFA(i%, 15) + $1,000 * PVIF(i%, 15)

Using financial calculator:
N = 15
PV = -1040
PMT = 65
FV = 1000

I = 6.09%

Annual YTM = 6.09%