What is the yield to maturity of a bond with 10 years to maturity and a coupon of 15%? The current price of this bond is $1,109. Assume interest is paid annually.
A) 12.0%
B) 12.5%
C) 13.0%
D) 13.5%

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) of a bond is the internal rate of return (IRR) for an investor if the bond is held until maturity, assuming that all payments are made as scheduled. The YTM can be found by solving the bond price formula for the discount rate (YTM), which equates the present value of the bond's future cash flows (coupon payments and the repayment of the principal at maturity) to its current price. Given the bond's annual coupon rate of 15% on a face value of $1,000 (which equals $150 annual coupon payment), a current price of $1,109, and 10 years to maturity, the YTM would be approximately 13.0% when solving this equation. This calculation typically requires financial calculator or spreadsheet software to solve iteratively for the YTM.

What Is the Yield to Maturity of a Bond with 10