## Solutions to bond yield practice problems

- Suppose a bond has a price today of $800, a coupon rate of 4%, and
six years remaining to maturity. If interest is paid semi-annually, what is
this bond's yield to maturity?
- PV=$800
- CF=$20 every six months
- N=6 x 2 = 12 six month periods
- FV=$1,000 (assumed)
- Calculate or estimate from tables: i=4.15
**Yield to maturity = 8.3%**

- Suppose a bond has a price today of $800, a coupon rate of 4%, and
six years remaining to maturity. If interst is paid annually, what is this
bond's yield to maturity?
- PV=800
- CF=$40
- N=6
- FV=$1,000 (assumed)
- Calculate or estimate from tables: i=8.38%
**Yield to maturity = 8.38%**

- The 6% coupon rate ABC bond has a price of $1,050, interest paid
semi-annually, and two years remaining to maturity. What is the ABC
bond's yield to maturity?
- PV=$1,050
- CF=$30
- N=4
- FV=$1,000 (assumed)
- Calculate or estimate from tables: i=1.7%
**Yield to maturity = 3.39%**

- Suppose a bond has a price today of $1,000, a coupon rate of 5%
and size years remaining to maturity. If interest is paid annually, what
is this bond's yield to maturity?
- Since the bond is selling at its face value, the coupon rate and the
yield to maturity are the same. No calculations necessary.
**Yield to maturity = 5%**