Up in Smoke Tobacco Shops' bond carries a 9 percent coupon, pays interest semiannually, and has 10 years to maturity. What is the bond's yield to maturity if the bond is selling for $937.75 (rounded to the nearest whole percent)?

Question

Quizplus · Accepted Answer

To calculate the yield to maturity, we need to solve for the discount rate that equates the present value of the bond's cash flows to its current market price. Using a financial calculator or Excel function, we find that the yield to maturity is approximately 10 percent.

Up in Smoke Tobacco Shops' Bond Carries a 9 Percent