Watters umbrella corp issued 12 year bonds 2 years ago at a coupon rate of 7.8%. The bonds make semiannual payments. If these bonds currently sell for 105% of par value, what is the YTM?
Kumar paras
(Ca Final)
(32 Points)
Replied 20 March 2012
| Originally posted by : Shishir | ||
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Watters umbrella corp issued 12 year bonds 2 years ago at a coupon rate of 7.8%. The bonds make semiannual payments. If these bonds currently sell for 105% of par value, what is the YTM? |
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Current Price = 105 [ Assumed Face value = 100]
Remaining life to maturity = 10 year [Period = 20]
Redemable value = 100
Coupon payment = 7.8/2 = 3.9
Semi Annual YTM = [3.9 + (100-105)/20]/(100+105)/2 = .03561 [i.e. 3.561%]
Annual YTM = 3.561 X (12/6) = 7.12% Ans
sweta
(Student of CA Final NCFM)
(283 Points)
Replied 20 March 2012
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