Ajax Corporation issued 10,000 units of $1,000 face value bonds that mature in 20 years and have a 4% coupon rate that is paid semi-annually. If the bonds were sold at 103.5% of their face value,
Calculate the yield to maturity at the end of year 8.

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) calculation involves determining the interest rate that equates the present value of future cash flows (coupon payments and face value at maturity) to the bond's current price. Given the bond's price at 103.5% of face value, semi-annual coupon payments, and the remaining 12 years to maturity, the YTM is approximately 3.64%.

Ajax Corporation Issued 10,000 Units of $1,000 Face Value Bonds