Calculate the Yield to Maturity on Tangshan Industries Bond
What is the Yield to Maturity (YTM) on the Tangshan Industries bond?
A. 13.29%
B. 10.79%
C. 11.39%
D. 12.19%
E. 14.75%
Answer:
The correct option is C. 11.39%.
Bond yield to maturity is the total return anticipated on a bond if it is held until it matures. A bond's yield to maturity is equivalent to its interest rate. This is the rate at which the bond will pay you back on a yearly basis until it matures.
The formula for calculating the yield to maturity on a bond is as follows:
YTM = (C + ((F - P) / n)) / ((F + P) / 2)
Where:
P is the price of the bond
n is the number of years left until maturity
C is the annual coupon interest rate
F is the bond's face value
Using the formula, the yield to maturity on the Tangshan Industries bond is as follows:
Given:
P = $1,250
F = $1,000
n = 10 years
C = 15%
YTM = 11.39%
Therefore, the yield to maturity on the Tangshan Industries bond is 11.39%.
To know more about Bond yield to maturity, you can refer to financial resources or websites that provide detailed information on bond calculations.