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ABC Company bonds are trading on the open market. These bonds mature in 10 years. The coupon rate on the ABC bonds are at 8.50%. The current price of the bonds is $1,062.50. What is the current yield to maturity of these bond

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beritop1089

Answer:

7.59%

Explanation:

Using a financial calculator, input the following to calculate Yield to Maturity (YTM). I'm using Texas Instruments BA II Plus model.

Face value of the bond ; FV = 1000

Annual coupon payment; PMT = Coupon rate * Face value ;

PMT= 8.5%*1000 = 85

Present value of bond or price; PV = -1062.50

Time to maturity in years ; N = 10

then compute annual interest rate ; CPT I/Y = 7.59%

The current yield to maturity of these bond  is 7.59%.

Given that,

  • . These bonds mature in 10 years.
  • The coupon rate on the ABC bonds are at 8.50%.
  • The current price of the bonds is $1,062.50.
  • The PMT is 8.50% of $1,000 = $85.
  • And, the future value be $1,000

Based on the above information, the calculation is to be shown in the attachment.

Learn more: brainly.com/question/6201432

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