Company A is selling bonds paying $105 annually that will mature 10 years from today

Economics Sep 04, 2020

Company A is selling bonds paying $105 annually that will mature 10 years from today. The bond is currently selling for $970, the face value of the bond is $1000.

Calculate:
-coupon rate
-current yield
-yield to maturity

Expert Solution

coupon rate = annual payment/ face value = 105/1000 = 10.5%
current yield = annual payment/ current price = 105/970 = 10.8%

for yield to maturity, we input
FV = 1000
PV = -970
Annual payment = 105
N = 10
By a financial calculator, we can compute I/Y = 11%

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