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Calculate YTM on deferred coupon bonds using texas instruments
Hi there,
Is there a quick way to answering question below? I have included answer below question, but it takes a while to calculate?
Thanks in advance!
Stellar Corp. recently issued $100 par value deferred coupon bonds, which will make no coupon payments in the next four years. Regular annual coupon payments at a rate of 8% will then be made until the bonds mature at the end of 10 years. If the bonds are currently priced at $87.00, their yield to maturity is closest to:
6% = Answer
The yield to maturity (r) is computed by solving for r in the following equation:
87.00 = 8/(1 + r)5 + 8/(1 + r)6 + 8/(1 + r)7 + 8/(1 + r)8 + 8/(1 + r)9 + 108/(1 + r)10, which gives a yield to maturity of 6.0%.
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