What is the yield to maturity (YTM)on a bond that sells for $950,has a coupon rate of 7%,matures in five years,and has a par value of $1,000?

Question

Quizplus · Accepted Answer

To calculate YTM, we need to use the formula: 
YTM = (annual interest + [(par value - current price) / years to maturity]) / [(par value + current price) / 2]
Plugging in the numbers, we get: 
YTM = (70 + [(1000-950) / 5]) / [(1000 + 950) / 2] = 8.24%
Therefore, the answer is B.

What Is the Yield to Maturity (YTM)on a Bond That