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Whatistheyieldtomaturityytm thecurrentyieldis

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Unformatted text preview: l payments and currently sell for 108% above par. Par value if $1,000. What is the current yield on the AA tech’s bonds? What is the Yield to Maturity (YTM)? The current yield is: Current yield = Annual coupon payment / Price Current yield = $75 / $1,080 Current yield = 0.0694 or 6.94% The bond price equation for this bond is: P0 = $1,080 = $37.50 ({1 – [1/(1 + r)]44} / r) + $1,000[1 / (1 + r)44] Using a spreadsheet, financial calculator, or trial and error we find: R = 3.397% This is the semiannual interest rate, so the YTM is: YTM = 2 * 3.397% YTM = 6.79% 3. Y...
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This note was uploaded on 10/14/2013 for the course MGT 160 taught by Professor Staff during the Fall '08 term at UC Davis.

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