A bond with a $95 annual coupon,maturing in 10 years at a value of $1,000 has a current market price of $950.What is the yield to maturity of the bond?

Question

Quizplus · Accepted Answer

Using a financial calculator or Excel, we can solve for the yield to maturity (YTM) of the bond. The calculation involves finding the discount rate that equates the present value of the bond's cash flows to its current market price.

Using the formula: 
PV = C x [1 - (1 + r)^-n]/r + FV/(1+r)^n 
where PV = present value, C = annual coupon payment, r = YTM, n = number of periods, and FV = face value. 
we can solve for the YTM with the given information: 
PV = $950, C = $95, FV = $1,000, n = 10

Solving for r, we get: 
r = 10.3%

Therefore, the correct answer is B) 10.3%.

A Bond with a $95 Annual Coupon,maturing in 10 Years