A 10-year bond with a $1,000 face value and 6% coupon rate is currently selling in the bond market for $700.Its yield to maturity is (approximately)

Question

Quizplus · Accepted Answer

We can use the formula for yield to maturity to solve this problem:

YTM = (C + (F - P) / n) / ((F + P) / 2)

Where:
C = coupon payment
F = face value
P = bond price
n = number of years to maturity

Plugging in the given values, we get:

YTM = (60 + (1000 - 700) / 10) / ((1000 + 700) / 2)
YTM = 10.57%

Rounding to the nearest tenth, we get the answer of 10.6%, which is answer choice D.

A 10-Year Bond with a $1,000 Face Value and 6