The bonds issued by Stainiess Tubs bear a 6 percent coupon, payable semiannually. The bonds mature in in 11 years and have a S1,000 face value. Currently, the bonds sell for $989. What is the vield to maturity?

a. 05.87 percent

b. 05.92 percent

c.06.08 percent

d.6.14 percent

To calculate the yield to maturity (YTM) for the bond, we can use the following formula:

\[
\text{YTM} \approx \frac{C + \frac{F - P}{n}}{\frac{F + P}{2}}
\]

Where:
- $ C $ is the annual coupon payment ($ C = 0.06 \times 1000 = 60 $ dollars),
- $ F $ is the face value of the bond ($ F = 1000 $ dollars),
- $ P $ is the current price of the bond ($ P = 989 $ dollars),
- $ n $ is the number of years to maturity ($ n = 11 $ years).

Since the bond pays interest semiannually, we need to adjust the formula to account for the semiannual payments:

1. $ C $ is split into two payments of $ 30 $ dollars each.
2. The number of periods is $ 2 \times 11 = 22 $.
3. The yield will be semiannual, so we'll have to multiply the final answer by 2 to get the annual YTM.

Now, let's solve for YTM using the approximation method and refine it if necessary.

\[
\text{YTM} \approx \frac{30 + \frac{1000 - 989}{22}}{\frac{1000 + 989}{2}} \times 2
\]

Let me calculate that.The yield to maturity (YTM) for the bond is approximately **6.13%**. Therefore, the closest option is:

**d. 6.14 percent**

Would you like more details or have any further questions?

Here are 8 related questions that might interest you:
1. How does the yield to maturity (YTM) differ from the current yield of a bond?
2. What factors can cause a bond's price to fluctuate?
3. How is the yield to maturity affected by changes in market interest rates?
4. What is the difference between nominal yield and yield to maturity?
5. How does the time to maturity impact the YTM of a bond?
6. What are some methods to calculate YTM more accurately than approximation?
7. Why do bonds with longer maturities generally have higher YTMs?
8. How does a bond's credit rating influence its yield to maturity?

**Tip**: Remember, the YTM is an important metric for bond investors as it reflects the total return an investor can expect if the bond is held to maturity, assuming all payments are made as scheduled.

Learn how to calculate the yield to maturity (YTM) for Stainiess Tubs bonds with a 6% coupon rate, semiannual payments, and a 11-year maturity period. Current bond price is $989. Understand the YTM formula and solve for the annualized yield. Answer provided is approximately 6.13%, closest to option d. 6.14 percent.

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