Chapter 3, Problem 7PP

Bond Yield One measure of a bond's performance is its Yield To Maturity (YTM). YTM values for government bonds are complex to calculate and are published in tables. However, they can be approximated with the simple formula $\text{YTM}=\frac{\text{intr}+a}{\text{b}}.$ where intr is the interest earned per year, $a=\frac{\text{face}\text{value-current market price}}{\text{years until maturity}},\text{and}\text{b}=\frac{\text{face}\text{value}+\text{current}\text{market}\text{price}}{2}.$ For insurance , suppose a bond has a face value of $\text{\$1,000}$ , a coupon rate of $4\%,$ matures in 15 years, and currently sells for $\text{\$}1180.$ Then $\text{intr}=\mathrm{.04.1000}=40,a=\frac{1000-1180}{15}=-12,b=\frac{1000+1180}{2}=1090,\text{and}\text{YTM}=\frac{40-12}{1090}\approx 2.57\%$ . Note; The face value of the bond is the amount it will be redeemed for when it matures, and the coupon interest rate is the interest rate stated on the bond. If a bond is purchased when it is first issued, then the YTM is the same as the coupon interest rate. Write a program that requests the face value, coupon interest rate, current market price, and years until maturity for a bond, and then calculates the bond's YTM. See Fig. 3.67.