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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 Summary

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

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