(Related to Checkpoint 9.2) (Yield to maturity) The market price is $725 for a 16-year bond ($1 comma 000 par value) that pays 9 percent annual interest, but makes interest payments on a semiannual basis (4.5 percent semiannually). What is the bond's yield to maturity? The bond's yield to maturity is nothing%. (Round to two decimal places.)

The answer is 13.2 percent

Explanation:

Yield to Maturity is the rate of return that a bondholder (investor) is expecting on his bond from the issuer.

N(Number of years)= 32 years (16 x 2)

I/Y(Yield to Maturity) = ?

PV(Present Value) = $725

PMT(Payment) $45

FV(Future value) = $1,000

Using Financial calculator:

Yield to Maturity is:

6.58 percent semi annual.

Therefore, annual YTM will be

6.58 x 2

=13.2 percent

borrow money from the government then pay the government back 5k