A Japanese company has a bond outstanding that sells for 94 percent of its ¥100,000 par value. The bond has a coupon rate of 6.1 percent paid annually and matures in 17 years.

Problem 7-4 Bond Yields [LO2]
A Japanese company has a bond outstanding that sells for 94 percent of its ¥100,000 par value. The bond has a coupon rate of 6.1 percent paid annually and matures in 17 years.

What is the yield to maturity of this bond (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Explanation
Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.

Here we need to find the YTM of a bond. The equation for the bond price is:

P = ¥94,000 = ¥6,100(PVIFAR%,17) + ¥100,000(PVIFR%,17)

Notice the equation cannot be solved directly for R. Using a spreadsheet, a financial calculator, or trial and error, we find:

R = YTM = 6.70%

Calculator Solution:

Enter

17

±¥94,000

¥6,100

¥100,000

N

I/Y

PV

PMT

FV

Solve for

6.70%

Thank you!