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    Thomas20132014's Avatar
    Thomas20132014 Posts: 1, Reputation: 1
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    #1

    Aug 29, 2013, 05:11 PM
    Bond Valuation
    Intercontinental Baseball Manufacturers (IBM) has an outstanding bond with a $1,000 face value that matures in 10 years. The bond, which pays $25 interest every six months ($50 per year), is currently selling for $598.55. What is the bond's yield to maturity?
    pready's Avatar
    pready Posts: 3,197, Reputation: 207
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    Aug 30, 2013, 06:59 AM
    You can use a YTM calculator that is online, just Google it to solve this.

    To solve this without a calculator you will start with the following information, which you have:
    C = coupon/interest payment (annual amount)
    F = face value of the bond
    P = price of the bond
    N = number of years to maturity
    YTM = yield to maturity (this will be an approximate number)

    Here are the steps:
    First F - P then divide it by N
    Now add this number to C, this is your numerator

    Now F + P and divide it by 2, this is your denominator

    Finally take your numerator and divide it by the denominator, then multiply this number by 100 to get your YTM as a percent.
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