Is there a way to solve for YTM in the below question using the TI calculator? CFAI did not give a detailed solution to this problem, thus suggesting that “r or YTM” could be solved through calculators. I remember somewhere in the readings CFAI does state that r could be solved through calculators and I wasn’t able to get it then. My TI calculator classifies r ( or I/Y) only as an input variable and hence cannot be computed.
“Dot.Com has determined that it could issue $1,000 face value bonds with an 8 percent coupon paid semi-annually and a five-year maturity at $900 per bond. If Dot.Com’s marginal tax rate is 38 percent, its after-tax cost of debt is closest to:
A. 6.2 percent.
B. 6.4 percent.
C. 6.6 percent.”
If this is not possible, what is the fastest way to do it. I’m thinking of using PV of annuity but still couldnt solve the r in the ff equation:
40 1040
900 = E* ——————- + —————–
( 1 + r / 2 ) ^9 (1 + r/2) ^10
*E represents summation in the above formula
“Dot.Com has determined that it could issue $1,000 face value bonds with an 8 percent coupon paid semi-annually and a five-year maturity at $900 per bond. If Dot.Com’s marginal tax rate is 38 percent, its after-tax cost of debt is closest to:
A. 6.2 percent.
B. 6.4 percent.
C. 6.6 percent.”
If this is not possible, what is the fastest way to do it. I’m thinking of using PV of annuity but still couldnt solve the r in the ff equation:
40 1040
900 = E* ——————- + —————–
( 1 + r / 2 ) ^9 (1 + r/2) ^10
*E represents summation in the above formula