Answer: 7.17%
Explanation:
Given,
YTM = ?
Annual Coupon, C = $85
Par Value, F = $1000
Current Bond Price, p = $1120
Maturity Year, n = 15
The yield to maturity is 7.17% from the data given in the question above. We will use the yield to maturity formula which stated as YTM = C + [(F-P)/n] / [(F+P)/2] where YTM is the yield to maturity,
C is the annual coupon,
F is the par value,
p is the current bond price, and
n is the maturity year.
YTM = 85 + [(1000-1120)/15] / [(1000+1120)/2]
YTM = 7.17%
