Ask Question
10 June, 18:37

The Timberlake-Jackson Wardrobe Co. has 10.5 percent coupon bonds on the market with nine years left to maturity. The bonds make annual payments and have a par value of $1,000. If the bonds currently sell for $1,142.49, what is the YTM? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.) Yield to maturity %

+4
Answers (1)
  1. 10 June, 21:38
    0
    Yield to maturity %: 8,2%

    Explanation:

    To know the YTM of the bond we need first to calculate the Present Value of the Principal and then through the annuity method calculate the Present Value of the coupons.

    Bond Value

    Principal Present Value = F / (1 + r) ^t

    Coupon Present Value = C x [1 - 1 / (1 + r) ^t] / r

    The price of this bond it's $492 + $651 = $1,142,49

    Bond $1,000

    Coupon $105,00

    Annual Rate 10,5%

    YTM 8,2%

    Years 9

    Present Value of Bonds $492 = $1,000 / (1+0,082) ^9

    Bond $1.000

    YTM Rate 8,20%

    Periods 9

    Present Value of Coupons $651 = $105 (Coupon) x 6,20

    6,20 = [1 - 1 / (1+0,082) ^9 ] / 0,082

    Bond $1.000

    YTM Rate 8,20%

    Periods 9
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “The Timberlake-Jackson Wardrobe Co. has 10.5 percent coupon bonds on the market with nine years left to maturity. The bonds make annual ...” 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