Explanation:
The coupon amount is $0.08 \times 2,000 = `
1`,600 = \frac{160}{(1 + \text{YTM})^1} + \frac{160}{(1 + \text{YTM})^2} + \frac{160}{(1 + \text{YTM})^3} + \frac{160}{(1 + \text{YTM})^4} + \frac{2,160}{(1 + \text{YTM})^5}
\text{YTM} = 13.80%
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Q.3859 Assume that an investor currently holds a bond whose par value is $2,000. The bond is currently priced at $1,600, matures in 5 years, and pays an annual coupon of 8%. Calculate the yield to maturity of the bond.
A
13.80%
B
16.38%
C
16.59%
D
17.34%
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