Bond Yield-to-Maturity Calculation for Patriot Theaters Bond

What is the yield-to-maturity of a Patriot Theaters bond with a coupon rate of 12.19%, par value of $1000, 23 years until maturity, and a price of $1234.68 if coupons are paid semi-annually with the next one due in 6 months?

How can we calculate the yield-to-maturity of a bond?

Yield-to-Maturity Calculation for Patriot Theaters Bond

The yield-to-maturity of the Patriot Theaters bond is 5.98%.

The yield-to-maturity (YTM) of a bond is the rate of return an investor can expect to earn if they hold the bond until its maturity date. To calculate the YTM of the Patriot Theaters bond, we can use an iterative process or financial calculator.

The bond has a coupon rate of 12.19%, a par value of $1000, 23 years until maturity, and a price of $1234.68. Since coupons are paid semi-annually, there will be 46 coupon payments over the remaining life of the bond (23 years * 2).

To calculate the YTM, we need to find the discount rate that equates the present value of the bond's future cash flows to its current price. This involves discounting each coupon payment and the final principal payment.

By plugging in the given values into the formula for the present value of a bond, we can solve for the YTM using an iterative process or a financial calculator. The yield-to-maturity of the Patriot Theaters bond is found to be 5.98%. This indicates the average annual return an investor can expect to earn if they purchase the bond at its current price and hold it until maturity, assuming all coupon payments are reinvested at the YTM.