You own a bond with a par value of $1,000 and a coupon rate of 8.50% (semiannual coupon). you know it has a current yield of 7.00%. what is its yield to maturity? the bond has 6 years to maturity. current yield = (annual payment / price). (hint: solve for price to answer the question). the answer is 4.40% but i dont know how to get that answer. i have a hp 10bll + financial calculator but i dont know how to put this into the calculator

YTM = 4.40%

Explanation:

From current yield we solve for price:

current yield: annual payment/ price

0.07 = 1,000 x 8.5% / price

85 / 0.07  = price = 1214,285714285714 = 1214.29

Now we solve for yield to maturity. This is the rate at which the present value value of the maturity and coupon payment are equal to his current price:

C42.50

time12 (6 years x 2 payment per year)

rate (semiannual as the payment are twice per year)

PVcoupon

Maturity   1,000.00

time   12.00

rate  

PVmaturity

PV c + PV m = $1,214.2903

So we got:

From here we solve using excel or financial calculator as you suggest.

notice this will give you the semiannual rate: 0.021988524 = 2.20%

You will have to multiply the answer by 2 giving you the 4.40% as you were told.

christopher columbus sail the ocean blue 1492

the correct answer is economics is a game without winners or losers.

unlike sports or games economic is a game without losers or winner rather it is a game where everyone wins. parties of business doing businesses exchange money with each other and hence exchange is done on the basis of goods. one party takes the goods and other sales it so there is winner on both sides. each party values more highly the good it gets than the good it gives up. both sides exchange only because both intend to increase their value. so there is no concept of lose or win.