Given
year 1 spot rate = 5.5%, year 2 spot rate = 6.25% year 3 spot rate = 7% year 4 spot rate = 8.25%
How do you find the YTM of the bond?
Use the spot rates to discount the cash flows and find the price of the bond. Then solve for I/Y in your financial calculator using the price found and the remaining inputs.
Oh, so you cannot just use the spot rates to find the YTM without dealing with DCF?
You can if you have inputted everything into the calculator. In fact, the process is known as bootstrapping, and the information provided is not enough. We need to know either the price or the coupon payment.
I doubt it! The only YTM you can find is that of the one year bond where the spot rate and YTM are the same. As I said, we need other information, in this case the coupon. I hope the question isn’t just giving spot rates and nothing else to calculate the YTM!!!