Eastern Corporation has $1,000 par value bonds with 4 years to maturity. The bonds pay an 8% coupon rate with semi-annual coupon interest payments. The bond's closing price is quoted at 101.25. Suppose you purchase the bond for the closing price. What is the bond's yield to maturity?

The bond's yield to maturity:

Given Information,  

Yield to maturity = 3.82% × 2

Yield to maturity= 7.64%

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7.64%

Explanation:

For computing the yield to maturity we have to applied the RATE formula i.e to be shown in the attachment

Given that,  

Present value = $1,000 × 101.25 = $1,012.50

Future value or Face value = $1,000  

PMT = 1,000 × 8% ÷ 2 = $40

NPER = 4 years × 2 = 8 years

The formula is shown below:  

= Rate(NPER;PMT;-PV;FV;type)  

The present value come in negative  

So, after applying the above formula,

The yield to maturity is

= 3.82% × 2

= 7.64%

answer(d) all of the choices are correct;