Warren Corporation is interested in a three-year, 11% annual coupon bond. A broker quotes a price of $930.35. What is the yield to Maturity?

Multiple Choice

10%


11%


12%


13%


14%

To determine the **Yield to Maturity (YTM)** for the bond, we need to calculate the rate of return that equates the bond's price to the present value of its future cash flows. The bond's future cash flows include the coupon payments and the face value repayment at maturity.

### Given:
- Coupon rate: **11%** (annual coupon)
- Bond price: **$930.35**
- Time to maturity: **3 years**
- Face value: **$1,000**
- Annual coupon payment: $ 1,000 \times 11\% = 110 $

The formula for calculating the bond price is the present value of the bond's cash flows:

\[
P = \sum \frac{C}{(1 + r)^t} + \frac{F}{(1 + r)^T}
\]

Where:
- $P$ is the bond price ($930.35),
- $C$ is the annual coupon payment ($110),
- $F$ is the face value of the bond ($1,000),
- $r$ is the YTM (which we are solving for),
- $T$ is the number of years to maturity (3).

Let's calculate the YTM.

Warren Corporation is interested in a three-year, 11% annual coupon bond. A broker quotes a price of $930.35. What is the yield to Maturity? 

Multiple Choice 

10% 
11% 
12% 
13% 
14%

Determine the yield to maturity for Warren Corporation's three-year, 11% annual coupon bond priced at $930.35. This finance problem involves calculating the present value of future cash flows, essential for finance students. Learn the step-by-step solution, suitable for undergraduate finance courses.

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