A 7.5% coupon bond with 16 years left to maturity is offered for sale at $834.92. What yield to maturity is the bond offering? (Assume interest payments are paid semi-annually and par value is $1,000.)

Question

Quizplus · Accepted Answer

First, we need to calculate the semi-annual coupon payment. 
Coupon payment = Par value x Coupon rate / 2 
Coupon payment = 1000 x 0.075 / 2 = $37.50

Next, we need to find the number of semi-annual periods with 16 years left to maturity. 
Number of periods = 16 years x 2 = 32

Using the financial calculator, we can find that the yield to maturity is 4.77%.

A 75% Coupon Bond with 16 Years Left to Maturity Is