CFA Practice Question

There are 490 practice questions for this study session.

CFA Practice Question

A corporate bond with a face value of $1,000 matures in two years and has a 10% coupon paid at the end of each year. The current price of the bond is $950. What is the yield to maturity for this bond?

A. 10.26%
B. 10.52%
C. 13.00%
Correct Answer: C

User Contributed Comments 15

User Comment
leoo how did you get that answer?
vrs3 Use calculate with:
FV =$1000
N = 2
Coupon = PMT = $1000 x 10% = $100
PV = Current price of the bond = -$950
Solve for i which is the yield = 12.99%
vrs3 Meant use calculator with:
anita present value should be entered as negative
stefdunk or, use the cashflow worksheet, -950, +100, +1100, IRR = 13.00
gaur is there a way to calculate YTM on the HP 12c. I have been doing it the dumb way by inputting the i from the 4 choices and calculating for PV untill I get -950. Doesn't take that long after u input the fv, n & pmt
MUTE Using HP 12c= Pmt=100, PV= -950, FV= 1000, N=2, i=? 12.997 approximately 13%
Spawellian remember corporate bonds assume annual coupons, government/agency bonds assume semi annual coupons
Beret Careful with the HP12C calculations : The PRICE and YTM calculations are done assuming a "semiannual" coupon payment. The question refers to an "annual" payment!
mattg Think of it from the potential INVESTOR's point of view: PV is negative because it is what you would have to pay for the bond today (cash outflow). That tripped me up when entering into the HP 12C
cleopatraliao or i use trial n error...
2014 Thanks stefdunk
Cfrey can someone please explain for the TI approved calculator
farhan92 as silly as this sounds i only recently found out about the +/- button...its great!
khalifa92 congrats 90s boy
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