What is the yield- to- maturity of a $1,000, 7% semi- annual coupon bond that matures in 2 years and currently sells for $997.07?

Question

Quizplus · Accepted Answer

The correct answer is D because the yield-to-maturity of the bond is 7.16%. This can be calculated using the following formula:YTM = (C + (FV - PV) / N) / ((FV + PV) / 2)where:C = coupon paymentFV = face valuePV = present valueN = number of periodsIn this case, the coupon payment is $35 (7% of $1,000 / 2), the face value is $1,000, the present value is $997.07, and the number of periods is 4 (2 years * 2 semi-annual periods per year).Plugging these values into the formula, we get:YTM = (35 + (1000 - 997.07) / 4) / ((1000 + 997.07) / 2)= (35 + 2.93 / 4) / ((1997.07) / 2)= (35 + 0.7325) / 998.535= 35.7325 / 998.535= 0.03576= 7.16%

What Is the Yield- To- Maturity of a $1,000, 7