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# Approximate yield to maturity

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Question to work:
a.
Bonds issued by West Motel Chain have a par value of \$1000, are selling for #1,100, and have 20 years remaining to maturity. The annual interest payment is 13.5% (\$135). Compute the approximate yield to maturity.

Use formula as follows:
Approximate yield to maturity (Y') =

Annual interest payment + (plus)

(Principal payment - Price of the bond) <<<---numerator]; divided by (another numerator) of number of years to maturity divided by (denominator) 06.(Price of the bond) + 0.4 (Principal payment)

b. Combine a trail and error approach with interpolation to find a more exact answer for this part b.
A calculator can be used, but all calculations and explanations can be presented in MS Word instead of MS Excel.

#### Solution Preview

Question to work:
a.
Bonds issued by West Motel Chain have a par value of \$1000, are selling for #1,100, and have 20 years remaining to maturity. The annual interest payment is 13.5% (\$135). Compute the approximate yield to maturity.

Use formula as follows:
Approximate yeld to maturity (Y') =

Annual interest payment + (plus)

(Principal payment - Price of the bond) <<<---numeratior]; divided by (another numerator) of ...

#### Solution Summary

The solution explains how to calculate the approximate yield to maturity on a bond

\$2.19