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18 May, 12:18

Scott turner has a bond with 10 years to maturity, a face value of $1,000, an 8% interest rate, and a market price of $800. what is the yield-to-maturity on this bond?

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  1. 18 May, 14:41
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    The yield to maturity, YTM, is the total return you could get from the bond if you keep the bond until it matures.

    To solve:

    Yield to maturity = { ($1,000 x 0.08) + [ ($1,000 - $800/10]}/[ ($800 + $1,000) / 2]

    Yield to maturity = 11.11%
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