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Yield to maturity: Rudy Sandberg wants to invest in four-year bonds that are currently priced at $868.43. These bonds have a coupon rate of 6 percent and pay semiannual coupon payments. What is the current market yield on this bond

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Answer:

The answer is 10.08%

Explanation:

Yield to maturity is the rate of return a bondholder(investor) is expecting on its bond(investment) from the bond issuer.

N(Number of years)= 8 years (4x 2)

I/Y(Yield to Maturity) = ?

PV(Present Value) = $868.43

PMT(Payment) = $30(6% of $1,000 ÷ 2)

FV(Future value) = $1,000

Using Financial calculator:

The yield-to-maturity is 5.04%

5.04%(semi annual)

Annual YMT = 5.04% x 2

=10.08%

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