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16 February, 00:32

The $1,000 face value bonds of Galaxies International have coupon of 6.45 percent and pay interest semiannually. Currently, the bonds are quoted at 103.4 and mature in 4 years. What is the yield to maturity?

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Answers (2)
  1. 16 February, 00:56
    0
    YTM = 52%

    Explanation:

    F = face value of bond = 1000

    Price of bond = 103.4

    t = 4 years = 4 * 2 = 8 periods for semi annual coupon payments.

    Coupon rate = 6.45% = 6.45%=.0645

    n=number of years to maturity = 4 years

    C = coupon payment = 1000 * coupon rate = 1000 * 6.45% = 64.6

    Formula: YTM = [C + (F-P/n) ] / (F+P) / 2

    = [64.5 + (1000-103.4) / 4] / [ (1000+103.4) / 2]

    = 288.6/551.7

    YTM = 52%
  2. 16 February, 02:43
    0
    the yield to maturity is 5.49%

    Explanation:

    Consider the following calculations

    Yield to Maturity = [Interest + (Price - Redeemable Value) / n] / (Price + Redeemable Value) / 2 = [32.25 + (1034 - 1000) / 8] / (1034 + 1000) / 2 = 2.745% semi-annually

    Annually = 2.745 x 2 = 5.49%.
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Home » Business » The $1,000 face value bonds of Galaxies International have coupon of 6.45 percent and pay interest semiannually. Currently, the bonds are quoted at 103.4 and mature in 4 years. What is the yield to maturity?
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