Yield to maturity: Alice Trang is planning to buy a six-year bond that pays a coupon of 10 percent semiannually. Given the current price of $878.21, what is the yield to maturity on these bonds?
A) 11%
B) 12%
C) 13%
D) 14%

Question

Quizplus · Accepted Answer

To calculate the yield to maturity, we need to use a financial calculator or an Excel spreadsheet using the formula =RATE(6*2,-(10/2),878.21,1000,0), where 6 represents the number of years, 2 represents the number of semiannual periods, 10/2 represents the coupon rate per period, 878.21 represents the current price, 1000 represents the face value, and 0 represents the initial guess for the rate. The result is approximately 13%, which corresponds to answer choice C.

Yield to Maturity: Alice Trang Is Planning to Buy a Six-Year