Business and finance: How do I calculate yield to maturity on a $100 bond?

Anonymous
timer Asked: Nov 15th, 2015
account_balance_wallet $5

Question Description

How do I calculate yield to maturity on a $100 bond? You can select the company of your choice.

Tutor Answer

kibara
School: Rice University

Thank you for the opportunity to help you with your question!

the purchase price of the bond is $100

we need to identify the face value of the bond which is referred to as "par value"

find the remaining years to maturity. If the bond is maturing in 2020 and we are currently in 2015, then the bond matures in 5 years time

identify the annual interest of the bond in dollars. if the annual interest rate is 10% and the par value of the bond is $100 then the annual interest is 10% x $100 or $10.

calculating yield to maturity

100$-90$=10$

100/5=20

50+20=70

70/90=7.78%

100-20=80

70/98=7.14%

(7-78-7.14)/2=7.46%

so the yield to maturity is 7.46%

Please let me know if you need any clarification. I'm always happy to answer your questions.

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Anonymous
Thank you! Reasonably priced given the quality not just of the tutors but the moderators too. They were helpful and accommodating given my needs.

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