Ask Question
23 November, 21:50

The $1,000 face value bonds of Galaxies International have coupon of 6.45 percent and pay interest semiannually. Currently, the bonds are quoted at 103.4 and mature in 4 years. What is the yield to maturity?

+5
Answers (2)
  1. 23 November, 22:02
    0
    YTM = 52%

    Explanation:

    F = face value of bond = 1000

    Price of bond = 103.4

    t = 4 years = 4 * 2 = 8 periods for semi annual coupon payments.

    Coupon rate = 6.45% = 6.45%=.0645

    n=number of years to maturity = 4 years

    C = coupon payment = 1000 * coupon rate = 1000 * 6.45% = 64.6

    Formula: YTM = [C + (F-P/n) ] / (F+P) / 2

    = [64.5 + (1000-103.4) / 4] / [ (1000+103.4) / 2]

    = 288.6/551.7

    YTM = 52%
  2. 23 November, 23:45
    0
    the yield to maturity is 5.49%

    Explanation:

    Consider the following calculations

    Yield to Maturity = [Interest + (Price - Redeemable Value) / n] / (Price + Redeemable Value) / 2 = [32.25 + (1034 - 1000) / 8] / (1034 + 1000) / 2 = 2.745% semi-annually

    Annually = 2.745 x 2 = 5.49%.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “The $1,000 face value bonds of Galaxies International have coupon of 6.45 percent and pay interest semiannually. Currently, the bonds are ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers