Sub: Finance Topic: Yield to Maturity of Bonds
Compute the yield to maturity on bonds
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Vertex bonds have a maturity value of $1,000. The bonds carry a coupon rate of 14 percent.
Interest is paid semi-annually. The bonds will mature in seven years. If the current market price
is $1,092.65, what is the yield to maturity on the bond?
Since the coupon payment is semiannual, so n = Years to Maturity * 2
Number of coupon payments (n) 14
Present Value (PV) $1,092.65
Future Value (FV) $1,000.00
Interest Rate 14%
Coupon Amount (I = 1,000 X 14% / 2)