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 96.5% of their face value, calculate the yield to maturity at the end of year 8.

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) can be calculated using the bond's current price, face value, coupon rate, and time to maturity. Given the bonds were sold at 96.5% of face value, the price is $965. The semi-annual coupon payment is $20 (4% of $1,000 divided by 2). With 24 periods remaining (12 years), the YTM calculation using these inputs results in approximately 4.38%.

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