You own a bond that pays $73 in interest annually. The face value is $1,000 and the current market price is $1,065.44. The bond matures in 14 years. What is the yield to maturity?

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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You own a bond that pays $73 in interest annually. The face value is $1,000 and the current market price is $1,065.44. The bond matures in 14 years. What is the yield to maturity?

Expert Solution
Step 1

The Given set of data is

Interest payment (C) annually is $73

The face value (F) is $1000

The current market price (P) is $1065.44

Bond maturity (n) in 14 years.

 

Formulae for Yield to maturity is 

YTM is C+(F+Pn)F+P2

Where C is Coupon/ Interest payment

F is the Face value

P is Price

n is years to maturity.

 

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