What is the yield to maturity on a discount bond that has a face value of $8000, is three years from maturity and is currently trading at $7450?
Question
Solution 1
To calculate the yield to maturity (YTM) on a discount bond, you can use the following formula:
YTM = [(FV / PV)^(1/n)] - 1
Where: FV = Face Value of the bond PV = Present Value or the price of the bond n = Number of years until maturity
In this case: FV = 7450 n = 3 years
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