The Pioneer Petroleum Corporation has a bond outstanding with an $80 annual interest payment, a market price of $900, and a maturity date in four years. Assume the par value of the bond is $1,000. Approximate yield to maturity? Exact yield to maturity?

The Pioneer Petroleum Corporation has a bond outstanding with an $80 annual interest payment, a market price of $900, and a maturity date in four years. Assume the par value of the bond is $1,000. Approximate yield to maturity? Exact yield to maturity?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 1P

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Question

The Pioneer Petroleum Corporation has a bond outstanding with an $80 annual interest payment, a market price of $900, and a maturity date in four years. Assume the par value of the bond is $1,000.

Approximate yield to maturity?

Exact yield to maturity?

Definition Definition Calculates the present value of a bond's expected future periodic coupon payments. Bond valuation determines the theoretical fair value of a particular bond and helps investors estimate what rate of return they could expect. The bond's theoretical fair value is computed by discounting the future cash flows or coupon payments by an applicable discount rate.

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