Answer:
10%
Explanation:
The actual return that an investor earn on a bond until its maturity is called the Yield to maturity. It is a long term return which is expressed in annual rate.
According to given data
It is assumed that face value of the bond is $1,000
Coupon Payment = C = $1,000 x 10.3% = $103 annually = $51.5 semiannually
Price of the Bond = P = $1,000 x 102% = $1,020
Numbers of period = n = (17-2) years x 2 = 30 periods
Use Following Formula to calculate YTM
Yield to maturity = [ C + ( F - P ) / n ] / [ (F + P ) / 2 ]
Yield to maturity = [ $51.5 + ( $1,000 - $1,020 ) / 30 ] / [ ($1,000 + $1,020 ) / 2 ]
Yield to maturity = $50.83 / $1,010 = 0.0503 = 5.03% = 5% per Semiannual
Yield to maturity = 5% x 2 = 10% annually
Yield to maturity = 3.56% semiannually OR 7.12% annually
