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 $1,118.74, what is the annualized yield to maturity?
A) 6.68%
B) 6.67%
C) 6.12%
D) 6.00%
Answer: A
Explanation: A) The answer is found through an iterative (trial and error) process using the bond pricing formula.
Bond Price = PMT × + ;
$1,118.74 = $40 × + ;
r = 3.340563%
YTM = 3.340563% × 2 = 6.68%.
MODE = END, P/Y = 2, C/Y = 2
INPUT 28 ? -1,118.74 40 1,000
KEY N I/Y PV PMT FV
CPT 6.68
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