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25 November, 08:46

A bond has a $1,000 par value, 11 years to maturity, and pays a coupon of 4.75% per year, semiannually. The bond can be called in five years at $1,050. If the bond's price is $797.92, what is its annual yield to maturity

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  1. 25 November, 12:23
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    The answer is 7.48

    Explanation:

    YTM = [ (C + (FV-PV) / t) ] / [ (FV + PV) / 2]

    FV = 1,000

    PMT = 47.50/2 = 23.75

    T = 11

    PV = - 797.92

    CPT I = 3.74

    AnnualizeD = 7.48
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