- CFA Exams
- CFA Exam: Level I 2021
- Study Session 14. Fixed Income (1)
- Reading 44. Introduction to Fixed-Income Valuation
- Subject 1. Bond Prices and the Time Value of Money

###
**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?

B. 10.52%

C. 13.00%

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 |