A $1,000, 10% coupon rate bond with 10 years remaining until maturity is selling for $788.10. Its yield to maturity at this price is:

Question

Quizplus · Accepted Answer

The yield to maturity is the rate at which the present value of the bond's future cash flows equals its current price. Here, the bond has a face value of $1,000, a coupon rate of 10%, and 10 years remaining until maturity. Using a financial calculator or Excel, we can solve for the yield to maturity as follows:
N = 10
I/Y = ?
PV = -788.10
PMT = 100
FV = 1000
Solving for I/Y, we get a yield to maturity of 14%. Therefore, the correct answer is choice C.

A $1,000, 10% Coupon Rate Bond with 10 Years Remaining