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Stone Sour Corp. Bond Valuation and Yield to Maturity With Semiannual Coupon Payments

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Stone Sour Corp. issued 20-years ago at a coupon rate of 7.1 percent. The bonds make semiannual payments. If these bonds currently sell for 105 percent of par value, what is the YTM?

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Solution Preview

Dear Student:

These instructions are for using a financial calculator HP 10BII. If you are using another financial calculator, you should adjust the inputs accordingly. Input the values into the financial functions of the calculator as follows.

N = (2)(20) = 40 (time to maturity with semiannual payments equals 40 6-month periods)
PV = (105%)(1000) = -$1050 ...

Solution Summary

This solution shows how to calculate the yield to maturity on a bond with semiannual payments using a financial calculator.

$2.19