- The current price of a 30-year, 4.6% coupon U.S. Treasury Bond
with eight (8) years to maturity is $1,112. Assuming the usual
maturity value of $1,000 and semi-annual coupon payments, what is
the Yield to Maturity (YTM) for this bond?
Formula Po = I[1-(1+i)-n] +
Step 1: set up the equation needed to
solve this problem.
Step 2: provide an estimate as to what
the YTM should be based (and explain that estimate in terms of the
Step 3: find the value (using a
financial calculator, Excel, or trial and error) to the nearest
basis point (i.e. 0.01%).