Joshua Corp. has 10% coupon bonds on the market with 8 years to maturity. The bonds make

QUESTION

Joshua Corp. has 10% coupon bonds on the market with 8 years to maturity. The bonds make semi-annual payments and currently sell for 107 percent of par. What is the Yieldto-Maturity (YTM) and current yield on Joshuas bonds?
Solution: YTM = Cash flow add (Face Value less Price) /n ) /(Face Value add Price)/2 YTM = 5 add (100 less 107)/16/(100 add 107)/2 YTM = 4.41 % Cash flow = 10% of 100 * 6 /12 = 5 Current Yield =

nual Coupons/Current Bond Price Current Yield = 10/107 Current Yield = 9.345 % Annual Coupons 10 (10% of 100) Current Bond Price 107

ANSWER:

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