Investor purchased bond for 953 jan 97 /face value 1000/interest 6.85/matures dec 2016/what yield -maturity?

6.85
6.92
7.19
7.26

If the investor purchased the bond at face value, the bonds YTM would equal its cupon rate (6.85).

Similarly, If the purchase price were different than face value - say less than 1000 (discount), you would know that the YTM would be greater than the cupon rate. If the bond is trading at a premium (greater than 1000), you would know the YTM is less than the cupon rate.

This question is easy if you happen to have a financial calculator. Me being the nerd I am happen to have one right here. The TI BA II - If you do a lot of these problems it is awesome. Type in:
P/Y = 2 (I am assuming it is semi-annual coupons)
N=40 (20 years/2 coupons per year)
PV = -953 (the present value or current price)
FV = 1000 (the future value or its maturity pay off)
PMT = 34.25 (payment or coupon, 6.85% of 1000 paid 1/2 at a time)

than press cpt (compute) and I/Y (interest per year) which will calculate the yield - 7.3%

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