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Calculating YTM of a four year default bond

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Use the following information to answer the question (s) below
Maturity (years) 1 2 3 4 5
Zero- coupon YTM 3.25% 3.50% 3.90% 4.25% 4.40%

Consider a four year default free bond with an annual coupon rate of 4.5% and a face value of $100. The YTM on this bond is closest to:

1. 3.85%
2. 4.20%
3. 4.40%
4. 4.35%

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Solution Summary

Solution depicts the steps to estimate the YTM of a four year default free bond.

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  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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