Radoski Corporation's bonds make an annual coupon interest payment of 7.35%.The bonds have a par value of $1,000,a current price of $1,130,and mature in 12 years.What is the yield to maturity on these bonds?

Question

Quizplus · Accepted Answer

Using a financial calculator, the yield to maturity of the bond is 5.82%. Alternatively, we can solve for the yield to maturity using the following formula:
PV = (C / r) x [1 - 1 / (1 + r)^n] + FV / (1 + r)^n
where PV = current price of the bond, C = annual coupon payment, r = yield to maturity, n = number of years to maturity, and FV = par value of the bond.
Plugging in the given values, we get:
1,130 = (73.50 / r) x [1 - 1 / (1 + r)^12] + 1,000 / (1 + r)^12
Solving for r, we get r = 5.82%. Therefore, the answer is B.

Radoski Corporation's Bonds Make an Annual Coupon Interest Payment of 7.35%.The