(Financial calculator required.) Paul can purchase bonds with 15 years remaining until maturity, a par value of $1,000, and a 9 percent annual coupon rate for $1,100. Paul's yield to maturity is ____ percent.

Question

Quizplus · Accepted Answer

To calculate the yield to maturity, we need to solve for the interest rate (i) in the following equation:
    $1,100 = ($90 / i) x (1 - 1 / (1 + i)^15) + $1,000 / (1 + i)^15
where $90 is the annual coupon payment ($1,000 x 9%), and 15 is the number of years remaining until maturity. Solving for i using a financial calculator, we get i = 7.84%, which is closest to choice B.

(Financial Calculator Required