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1 May, 18:50

Parkway Void Co. issued 17-year bonds two years ago at a coupon rate of 10.1 percent. The bonds make semiannual payments. If these bonds currently sell for 97 percent of par value, what is the YTM?

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  1. 1 May, 19:56
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    The answer is

    0.615percent for semi annual

    Annual YTM = 1.2 percent

    Explanation:

    The formula for determining the Yield-to-Maturity (YTM) is:

    PV = PMT / (1+r) ^1 + PMT / (1+r) ^2 ... PMT / (1+r) ^1 PMT + FV / (1+r) ^n

    We are to calculate Yield-to-Maturity (YTM) which is the rate of return on the bond to an investor.

    Using a Financial calculator. Input the following:

    N = (17 years - 2 years) x 2 = 30

    1/Y = ?

    PV = 97percent x $1,000 ($970)

    PMT = 10.1/2 = 5.05 (semi - annual)

    FV = $1,000

    1/Y = 0.615 (semi annual)

    Annual YTM = 0.615 x 2

    =1.2 percent
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Home » Business » Parkway Void Co. issued 17-year bonds two years ago at a coupon rate of 10.1 percent. The bonds make semiannual payments. If these bonds currently sell for 97 percent of par value, what is the YTM?
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