Man-zeer Inc.,(a Kramer/Costanza joint venture)bonds are currently trading at $974.79.The bonds have a face value of $1,000,an annual coupon rate of 7.5% with payments made semi-annually,and mature in 20 years.What is the yield-to-maturity?

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Quizplus · Accepted Answer

P_bond = C × 11ea7fdb_fbff_9d7c_a768_eff9a545e464_TB2902_11 + 11ea7fdb_fbff_9d7d_a768_732a171769d0_TB2902_11 $974.79 = $75 × 11ea7fdb_fbff_9d7e_a768_fb9b1056641c_TB2902_11 + 11ea7fdb_fbff_9d7f_a768_55505b5c81df_TB2902_11 k_d = 7.75% Using a financial calculator: N = 20, PMT = 75, PV = $-974.79, FV = 1,000, CPT I/Y = 7.75% As a quick check: Since the price is only a little below par, the yield to maturity should be only slightly above the coupon rate.

Man-Zeer Inc