If the annual coupon is $2,243.5,the face value $100,000,the market price $124,345.43,and the number of years to maturity 23.76,what is the approximate yield to maturity?

Question

Quizplus · Accepted Answer

Yield to maturity can be calculated using the following formula:

Market price = (annual coupon payment / yield) x [1 - 1/(1 + yield)^(number of years to maturity)] + (face value / (1 + yield)^(number of years to maturity))

We know the values of annual coupon payment, face value, market price, and number of years to maturity. We need to find the yield to maturity.

Substituting the values in the formula, we get:

124345.43 = (2243.5 / yield) x [1 - 1/(1 + yield)^(23.76)] + (100000 / (1 + yield)^(23.76))

We can solve this equation using trial and error or by using a financial calculator. By trial and error, we get an approximate yield to maturity of 1.42%.

Therefore, the best choice is B, with an approximate yield to maturity of 1.42%.

If the Annual Coupon Is $2,243