Quigley Inc.'s bonds currently sell for $1,080 and have a par value of $1,000.They pay a $100 annual coupon and have a 15-year maturity,but they can be called in 5 years at $1,125.What is their yield to maturity (YTM)?

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) is the total return anticipated on a bond if the bond is held until it matures. It can be calculated using financial calculators or spreadsheet software by inputting the current price of the bond ($1,080), the par value ($1,000), the annual coupon payment ($100), and the number of years to maturity (15). The correct YTM in this case is 9.01%, which accounts for the bond's price premium, its coupon rate, and its time to maturity.