Bond Yields Find the promised yield to maturity for a 7% coupon, $1,000 par 20 year bond selling at $1115.00. The bond makes semiannual coupon payments.5.52%6.07%6.00%6.22%

Answer: Yield to maturity = 2 × 3.037 = 6.07%Given:Face Value = $1000Bond Price = $1115Semi annual coupon interest = 1000 × [tex]\frac{7 }{2}[/tex] % = $ 35We'll equate the semi yield to maturity, using the following formula:Semi yield to maturity = [tex]\frac{\frac{Face\ Value - Bond\ Price}{n} + Coupon\ Interest}{\frac{Face\ Value + Bond\ Price}{2}}[/tex]where; n = no. of semi annual period = 40Using the value in above equation, we getSemi yield to maturity = [tex]\frac{\frac{1000 - 1115}{40} + 35}{\frac{1000 + 1115}{2}}[/tex]Semi yield to maturity = 3.037%Therefore , yield to maturity = 2 × 3.037 = 6.07%