= 80/934.96 ≈ 0.0854 = 8.54%
C = $100
FV = $1000
PV = $900
N = 10 years
YTM = (C + ((FV - PV) / N)) / ((FV + PV) / 2)
Put in all of the values in this formula, we have YTM = 11.58%
Yield to maturity is the overall expected return on a bond if it is retained until it reaches its
maturity date. Yield to call signifies the return on a bond if it is redeemed by the issuer before
9. Types of bonds
i. debentures: unsecured bonds that are not backed by specific collateral. Instead, they rely on
the creditworthiness and general reputation of the investor for repayment.
ii. convertible bonds: bonds that can be converted into a predetermined number of shares of
the issuing company's common stock.
iii. junk bonds: bonds issued by companies or entities with lower credit ratings.
iv. callable bonds: bonds that can be redeemed by the issuer before their maturity date.
- If the company has taken on significant debt relative to its earnings and assets, it may raise
concerns about its ability to meet its financial obligations.
- If the company's financial performance has weakened, declining revenues, profitability, or cash
flow could lead to a lower credit rating.
- Overall deterioration of the pharmaceutical industry, such as increased competition, patent
expirations, or regulatory hurdles, it can impact the company's ability to generate stable cash
flows and meet its financial commitments.