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EarthCOM
On October 4^th,2000,long distance company,EarthCOM,issued bonds to finance a new wireless product.The bonds were issued for 30 years (mature on October 4^th,2030) ,with a face value of $1,000,and SEMIANNUAL coupons.The coupon rate on these bonds is 8% APR.Over the last 4 years,the company has experienced financial difficulty as the long distance market has grown more competitive.
-Refer to EarthCOM.Suppose that today (October 4^th,2002) ,EarthCOM admits to fraud in reporting revenues over the last 3 years.The price of EarthCOM immediately tumbles to $500.What is the new yield-to-maturity on EarthCOM bonds? (Express as an APR)

Question

Quizplus · Accepted Answer

n' = 52,r' = YTM/2,PV = -$500,PMT = 8%*1000/2 = $40,FV = $1,000
r' = 8.104%
YTM = 16.21%

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