Rogue Outfitters Inc. has outstanding $1,000 face value 8% coupon bonds that make semiannual payments, and have 14 years remaining to maturity. If the current price for these bonds is $987.24, what is the annualized yield to maturity?
A) 8.00%
B) 8.38%
C) 8.15%
D) 8.64%
Answer: C
Explanation: C) The answer is found through an iterative (trial and error) process using the bond pricing formula.
Bond Price = PMT × + ;
$987.24 = $40 × + ;
r = 4.077260%
YTM = 4.077260% × 2 = 8.15%.
MODE = END, P/Y = 2, C/Y = 2
INPUT 28 ? -987.24 40 1,000
KEY N I/Y PV PMT FV
CPT 8.15
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