Answer:
the yield to maturity on this bond is 3.90 %
Explanation:
The Yield to Maturity (YTM) is the interest rate that will make the present value of cash flows equal to the price or initial investment.
Use the time value of money techniques to find the yield to maturity on this bond as follows :
PV = - $1000
N = 30 × 2 = 60
PMT = ($1000 × 3.90%) ÷ 2 = $19.50
P/yr = 2
FV = $1000
YTM = ?
Using a Financial calculator to input the values as above, the yield to maturity on this bond will be 3.90 %.
