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    Calculating Investor's Yield to Maturity

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    You are considering the purchase of Hytec bonds that were issued 14 years ago. When the bonds were originally sold, they had a 30-year maturity and a 14.375% coupon interest rate that is payable semiannually. The bond is currently selling for $1,508.72. What is the yield to maturity on the bonds?

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    Solution Preview

    Please refer attached file for better clarity of tables and formulas.

    Face Value of bond=$1,000.00
    Semi annual Coupon amount=(1000*14.375%)/2=$71.875
    Time left for maturity=30-14=16
    No. of coupon payment left=2*16=32
    Current price of bond=$1,508.72

    Let us see cash flows of coupons, maturity and purchase values
    Period ...

    Solution Summary

    Solution describes the steps to calculate yield to mturity (YTM) for a given coupon paying bond.