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An 8% coupon bond is currently trading at N$78
An 8% coupon bond is currently trading at N$78.40, and it will pay its face value of N$100 at the end of 15 years. What is the yield to redemption?
Expert Solution
Coupon payment = Face value * Coupon rate = 100 *8% = $8
Yield to redemption = [Coupon payment +(Face value - Current price / No of years)]/ ( Face value + Current price/2)
= [8 +(100 - 78.4) / 15)]/ ( 100 + 78.4)/2)
= 10.58%
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