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Today at 5:18 AM
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Answered

New Markets has $1,000 face value bonds outstanding that pay interest SEMIANNUALLY, mature in 16 years, and have a 4 percent coupon. The current price is quoted at 93.546. What is the yield to maturity?

Answer :

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Today at 5:23 AM

Answer:

4.58%

Explanation:

Using the financial calculator as shown below , we can determine the yield to maturity which is the discount rate used in discounting bond's future cash flows to present:

N=32 (number of semiannual coupons in 16 years=16*2=32)

PMT=semiannual coupon=$1000*4%*6/12=$20

PV=-935.46(93.546%*$1000=$935.46 )

FV=1000 (face value)

lastly enter I/Y=2.29% (semiannual yield to maturity)

annual yield to maturity=2.29% *2=4.58%

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