A coupon bond which pays interest of $60 annually,has a par value of $1,000,matures in 5 years,and is selling today at a $84.52 discount from par value.The approximate yield to maturity on this bond is _________.

Question

Quizplus · Accepted Answer

To find the yield to maturity on the bond, we need to use the formula for yield to maturity:

YTM = (Annual interest payment + (Par value - Purchase price) / Number of years to maturity) / ((Par value + Purchase price) / 2)

Plug in the values given:

YTM = (60 + (1000 - 915.48) / 5) / ((1000 + 915.48) / 2)

YTM = 8%

Therefore, the approximate yield to maturity on this bond is 8%.

A Coupon Bond Which Pays Interest of $60 Annually,has a Par