Question

An AT&T bond has 10 years until maturity, a $1,000 nominal value, a coupon rate of 8% and sells for $1,100 (coupon is paid annually).

What is the yield to maturity?

Answer 1

$YTM=(C+(F-P)/n)/((F+P)/n)$

Where

C - Coupon payment

F -face value

P - Price

n - years to maturity

$Coupon Rate = C/F$

$C=0.08×1000=80$

$YTM=(80+(1000-1100)/10)/((1000+1100)/10=70/210=1/3$