ABC Company bonds are trading on the open market. These bonds mature in 10 years. The coupon rate on the ABC bonds are at 8.50%. The current price of the bonds is $1,062.50. What is the current yield to maturity of these bond

7.59%

Explanation:

Using a financial calculator, input the following to calculate Yield to Maturity (YTM). I'm using Texas Instruments BA II Plus model.

Face value of the bond ; FV = 1000

Annual coupon payment; PMT = Coupon rate * Face value ;

PMT= 8.5%*1000 = 85

Present value of bond or price; PV = -1062.50

Time to maturity in years ; N = 10

then compute annual interest rate ; CPT I/Y = 7.59%

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