A Japanese company has a bond outstanding that sells for 93 percent of its ¥100,000 par value. The bond has a coupon rate of 6 percent paid annually and matures in 16 years. What is the yield to maturity of this bond (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.)

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Business

Lawrence Hood

24 December, 15:35

A Japanese company has a bond outstanding that sells for 93 percent of its ¥100,000 par value. The bond has a coupon rate of 6 percent paid annually and matures in 16 years. What is the yield to maturity of this bond (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.)

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Isis Rosario · Answer 1

The yield to maturity is 6.67%

Explanation:

Yield to maturity is the rate of return that a bond holder will earn if the bond is held until maturity. It is a long term return value but expressed in annual rate figure.

Selling price = ¥100,000 x 93% = ¥93,000

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

YTM = [ ¥6,000 + (¥100,000 - ¥93,000) / 16 ] / [ (¥100,000 + ¥93,000) / 2 ]

YTM = ¥6,437.5 / ¥96,500

YTM = 0.0667

YTM = 6.67%