An investor pays $1,230 for a bond with a face value of $1,000 and an annual coupon rate of 9 percent. The investor plans to hold the bond until its maturity date in eight years. The bond has a yield to maturity of __________ percent. (Note: This question requires a financial calculator.)
A) 5.39
B) 5.67
C) 10.94
D) 9.00

Question

Quizplus · Accepted Answer

Using a financial calculator, we can solve for the yield to maturity (YTM) as follows:
N = 8
PMT = 90 (9% of $1,000)
FV = 1,000
PV = -1,230
Solving for I/Y, we get 5.39%. Therefore, the answer is choice A.

An Investor Pays $1,230 for a Bond with a Face