Douglas Dynamics Inc.has outstanding $1,000 face value 8% coupon bonds that make semiannual payments,and have 14 years remaining to maturity.If the current price for these bonds is $987.24,what is the annualized yield to maturity?

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) can be calculated using the bond price, coupon rate, and time to maturity. Given the bond's price is slightly below its face value, the YTM will be slightly higher than the coupon rate of 8%. Calculating the YTM using the formula or a financial calculator gives approximately 8.15%.