Two years ago, Trans-Atlantic Airlines sold $250 million worth of bonds at $1,000 each. The bonds had a maturity of 12 years and a coupon rate of 12%. Today these bonds are selling for $910. Determine the yield-to-maturity (to the nearest tenth of one percent).

Question

Quizplus · Accepted Answer

To calculate the yield-to-maturity, we need to use the present value formula and then solve for the yield. Using a financial calculator or Excel, we can find that the yield-to-maturity is approximately 13.7%.

Two Years Ago, Trans-Atlantic Airlines Sold $250 Million Worth of Bonds