Yield to maturity: Rudy Sandberg wants to invest in four-year bonds that are currently priced at $868.43. These bonds have a coupon rate of 6 percent and pay semiannual coupon payments. What is the current market yield on this bond

The answer is 10.08%

Explanation:

Yield to maturity is the rate of return a bondholder (investor) is expecting on its bond (investment) from the bond issuer.

N (Number of years) = 8 years (4x 2)

I/Y (Yield to Maturity) = ?

PV (Present Value) = $868.43

PMT (Payment) = $30 (6% of $1,000 : 2)

FV (Future value) = $1,000

Using Financial calculator:

The yield-to-maturity is 5.04%

5.04% (semi annual)

Annual YMT = 5.04% x 2

=10.08%