A bond has a $1,000 par value, 15 years to maturity, and a 8% annual coupon and sells for $1,080. What is its yield to maturity (YTM)? Round your answer to two decimal places.

YTM = 7.27%

Explanation:

We know,

Yield to Maturity (YTM) =

Here,

I = Coupon Payment = Coupon Rate × Par Value

M = Par Value

= Market value/Current value

n = Number of years/periods.

Given,

M = $1,000

= $1,080

I = $1,000 × 8% = $80

n = 15 years

Putting the values into the formula, we can get...

Yield to Maturity (YTM) =

or, YTM =

or, YTM =

or, YTM = 0.072730

Therefore, YTM = 7.27%

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