An AT&T bond has 10 years until maturity, a coupon rate of 8 percent, and sells for $1,100.
a. What is the current yield on the bond?
80 / 1,100. = 7.2%
b. What is the yield to maturity?© BrainMass Inc. brainmass.com June 3, 2020, 6:21 pm ad1c9bdddf
The YTM is the IRR of the cash flows. You have to use trial and error method to find the YTM. The cash flows are $80 per year as interest for 10 years and $1,000 as principal repayment. The YTM is the discount rate that would make the present value of the cash flows equal to the price today. We start with 7% ( since the price is ...
The solution explains how to calculate the current yield and YTM of a bond