The Douglas Dynamics Corporation $1,000 par value, 15% annual coupon bonds, have 6 years remaining to maturity and are currently selling for $938.45. What is the firm's yield to maturity for these bonds?
A) 15.00%
B) 16.70%
C) 16.66%
D) 15.47%
Answer: B
Explanation: B) The answer is found through an iterative (trial and error) process using the bond pricing formula.
Bond Price = PMT × + ;
$938.45 = $150 × + ;
r = 16.70%.
MODE = END, P/Y = 1, C/Y = 1
INPUT 6 ? -938.45 150 1,000
KEY N I/Y PV PMT FV
CPT 16.70
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