Respuesta :
Answer: Yield to maturity = 5.3%, Option (b) is correct.
Explanation:
Given that,
Coupon rate = [tex]5\frac{1}{2}[/tex]%
Time period = 16 years until maturity
Par value = $1000
currently selling at = $1024
Yield to maturity = [tex][(\frac{Face\ value}{present\ value} )^{\frac{1}{Time period} }] - 1[/tex]
= rate(16,5.5%,-1024,1000)
= 5.3%
If you purchase the bond, the AYTM is 5.3%.
What is the AYTM?
The yield to maturity of a bond is the total return of a bond that is expected if the bond is held to maturity.
The YTM of the bond can be determined using a financial calculator:
- Cash flow in year 0 = -1024
- Cash flow from year 1 to 16 = 5 1/2% x $1000 = $55
- Cash flow in year 0 = 1000
YTM = 5.3%
To learn more about YTM, please check: https://brainly.com/question/26484024
