Skye Industries Inc.bonds currently have 14 years remaining to maturity.What is the yield to maturity of the firm's semi-annual bonds if they carry a face value of $1,000,an annual coupon rate of 8% and have a current price of $885.16?
A)8.00%
B)8.75%
C)9.50%
D)10.25%

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) can be calculated using the formula for bond pricing, which equates the present value of future cash flows (coupon payments and face value) to the current price of the bond. Given the bond's current price of $885.16, a face value of $1,000, an annual coupon rate of 8% (resulting in semi-annual payments of $40), and 28 periods (14 years x 2), the YTM is approximately 9.50%.