mimibear155 mimibear155

04-11-2022
Business

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a $1,000,000, 20 year bond has a stated rate of 10% and sells for $928,000. what is the yield to maturity? multiple choice question.

Answer :

tutorconsortium113 tutorconsortium113

08-11-2022

The Yield to maturity is the discount rate that equates then price of the bonds to the present of cash inflows expected from the bond

What is the yield to maturity?

The yield on the bond can be determined as follows using the formula below:

YM = C + F-P/n) ÷ 1/2 (F+P)

YM-Yield to maturity-

C- annual coupon

F- Face Value

P- Current Price

n- number of years

Coupon = coupon rate × Nominal value = 1,000 000× 10%=100000

Face Value = 1000000

YM-?, C- 100000, Face Value - 1,000000 P-911 , n- 10

YM = (100000+ (1000000-928000)/20) ÷ ( 1/2× (1000000 + 928000 )

YM = 36000 / 1000 = 36%

Yield to Maturity =36%

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