Debt:
223,000 7.0 percent coupon bonds outstanding, 25 years to maturity, selling for 107 percent of par; the bonds have a $1,000 par value each and make semiannual payments.
I need help finding the YTM...
To find the Yield to Maturity (YTM) for the given bond, you can use the following formula or a financial calculator:
YTM = C + ((F - P) / n) / ((F + P) / 2)
Where:
- YTM is the Yield to Maturity
- C is the coupon payment per period
- F is the face value or par value of the bond
- P is the purchase price or present value of the bond
- n is the number of periods until maturity
Given information:
Coupon payment (C) = 7.0% of $1,000 = $70
Face value (F) = $1,000
Purchase price (P) = 107% of $1,000 = $1,070
Number of periods until maturity (n) = 25 years x 2 semiannual periods = 50 periods
Substituting the values into the YTM formula:
YTM = $70 + (($1,000 - $1,070) / 50) / (($1,000 + $1,070) / 2)
Now, we can calculate YTM using the above formula:
YTM = $70 + (-$70 / $1,035) ≈ 0.0068 or 0.68%
Therefore, the Yield to Maturity (YTM) for the given bond is approximately 0.68%.