The bonds issued by Hardwood Floors & More have a 9.25% coupon and pay interest annually. The face value is $1,000 and the current market price is $1,014.60. The bonds mature in 16 years. What
Is the yield to maturity on these bonds?

Question

Quizplus · Accepted Answer

To calculate yield to maturity, we use the following formula:
YTM = (Annual interest payment + (Face value - Market price) / Number of years to maturity) / ((Face value + Market price) / 2)
Plugging in the values, we get:
YTM = (92.50 + (1000 - 1014.60) / 16) / ((1000 + 1014.60) / 2) = 0.0907 or 9.07%
Therefore, the answer is choice C, 9.07%.

The Bonds Issued by Hardwood Floors & More Have a 9.25