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You own a bond that pays $64 in interest annually. The face value is $1,000 and the current market price is $1,062.50. The bond matures in 30 years. What is the yield to maturity? (round your answer to two decimal places)

Respuesta :

Answer:

the yield to maturity of this bond is 5.7%

Explanation:

given data

pays interest annually C =  $64

face value F = $1,000

current market price P = $1,062.50

bond matures n = 30 years

solution

we get here yield to maturity that is express as

yield to maturity =

yield to maturity = [C+ (F-P) ÷ n] ÷ [(F+P) ÷ 2   ]     .................1

put here value and we get

yield to maturity = [tex]\frac{64+(1000-1062.50)}{11}[/tex]  ÷ [tex]\frac{(1,000+1,062.50)}{2}[/tex]

yield to maturity = 0.057

so that the yield to maturity of this bond is 5.7%

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