Columbia Corporation issued a 20-year bond 10 years ago. The bond, which pays $8

Question

Columbia Corporation issued a 20-year bond 10 years ago. The bond, which pays $80 interest annually, was issued at par. If the bond is currently selling for $820, what is the approximate yield to maturity? 

Columbia Corporation issued a 20-year bond 10 years ago. The bond, which pays $80 interest annually, was issued at par. If the bond is currently selling for $820, what is the approximate yield to maturity? 

Columbia Corporation issued a 20-year bond 10 years ago. The bond, which pays $80 interest annually, was issued at par. If the bond is currently selling for $820, what is the approximate yield to maturity? 

Columbia Corporation issued a 20-year bond 10 years ago. The bond, which pays $80 interest annually, was issued at par. If the bond is currently selling for $820, what is the approximate yield to maturity? 

Columbia Corporation issued a 20-year bond 10 years ago. The bond, which pays $80 interest annually, was issued at par. If the bond is currently selling for $820, what is the approximate yield to maturity? 

Explanation / Answer

So after 10 years of issue the present value of bond is $820.

Let I = 1/(1+ YTM) YTM = yield to maturity
facevalue = $1000

So 820 = 80 * (I + I ^2+ .... + I^10) + 1000*I^10

Solving gives, YTM = 11%

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects