YTM question

CFA Level I
#1

Stellar Corp, recently issued $100 par value deferred coupon bonds, which will make no coupon payments in the next four years. Regular annual coupon payments at the rate of 8% will then be made until the bonds maturity at the end of 10 years. If the bonds are currently priced at $87.00, their YTM is closest to?

A. 6.0%

B. 10.1%

C. 8.0%

Here is the computed solution

87.00= 8/((1+r)^5)+8/((1+r)^6)+8/((1+r)^7)+8/((1+r)^9)+108/((1+r)^10)

I must have forgotten something simple, how would you some this using N,I/Y, PV, PMT,FV keys?

Thank you!!

#2

Iā€™d use the CF worksheet instead due to the non-level payments.

C01 = -87 C01 = 0 F01 = 4 C02 = 8 F02 = 5 C03 = 108 F03 = 1

2nd CPT IRR 5.9999

1 Like
#3

Thank you! That makes a lot more sense!