Question

M/S. Marutham Investment Bond 2013 was issued in January 2014, with a maturity period of 2 years. With a Coupon payment of 7% per annum made
every 6 months with Face value of Rs.100. What is the YTM for the bond, if the prevailing market price was Rs. 84 as at January 2014?

Answer 1

Answer:

M/S. Marutham Investment Bond 2013 was issued in January 2014, with a maturity period of 2 years. With a Coupon payment of 7% per annum made every 6 months with Face value of Rs.100. What is the YTM for the bond, if the prevailing market price was Rs. 84 as at January 2

Answer 2

Given:

Face value= 100

Current price=84

Compound coupon semi Annually

So, n = 2*maturity years = 4

To find:

YTM Yeild to maturity:

$ytm = \sqrt[n ]{ \frac{face \: value}{current \: price} } - 1$

$ytm = \sqrt[4 ]{ \frac{100}{84} } - 1$

$ytm = 1.04455227307 - 1$

$ytm = 1.045 - 1$

$ytm = 4.5\%$

Solution:

ytm= 4.5% semi Annually.