A bond has a face value of $1,000 and five years to maturity.This bond has a coupon rate of 13 percent and is selling in the market today for $902.Coupon payments are made annually on this bond.What is the yield to maturity (YTM)for this bond?
A)13 percent
B)12.75 percent
C)16 percent
D)11.45 percent
E)12 percent

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) is the interest rate that makes the present value of the bond's cash flows equal to its current market price. Given the bond's face value, coupon rate, market price, and time to maturity, the YTM is calculated to be approximately 16 percent.

A Bond Has a Face Value of $1,000 and Five