Julia hen just purchased a $1,000 face value bond for $987. The bond pays $50 in interest every six months and matures in five years. The yield to maturity for this bond is __________ percent. (Note: This question requires a financial calculator.)

Question

Quizplus · Accepted Answer

Using a financial calculator, we can find the yield to maturity (YTM) for this bond.

Inputting the following information into the calculator:

N = 10 (since there are 5 years left and interest is paid semi-annually) 
I/Y = ? (this is what we are trying to find) 
PV = -987 (negative since it's a cash outflow) 
PMT = 50 
FV = 1000

We get a YTM of 10.3%.

Julia Hen Just Purchased a $1,000 Face Value Bond for $987