Shawna Carter wants to invest her recent bonus in a four-year bond that pays a coupon of 11 percent semiannually. The bonds are selling at $962.13 today. If she buys this bond and holds it to maturity, what would be her yield? (Round to the closest answer.)

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) can be calculated using the bond price formula, considering the semiannual interest payments, the face value of the bond (usually $1,000 unless stated otherwise), the current market price, and the time to maturity. Given the semiannual interest payments, the formula involves solving for the interest rate (YTM) that equates the present value of all future cash flows (interest payments and the principal repayment at maturity) to the bond's current price. The calculation involves iterative methods or financial calculators, and for this question, when the inputs are correctly applied, the YTM is closest to 12.2%.

Shawna Carter Wants to Invest Her Recent Bonus in a Four-Year