- Stellar Corp. recently issued $100 par value deferred coupon bonds, which

will make no coupon payments in the next four years. Regular annual coupon payments at a rate of 8% will then be made until the bonds mature at the end of 10 years. If the bonds are currently priced at $87.00, their yield to maturity is closest to: - A 6.0%.
- B 8.0%.
- C 10.1%.

A is correct. The yield to maturity ® is computed by solving for r in the following equation: 87.00=8/(1+r)5 +8/(1+r)6 +8/(1+r)7 +8/(1+r)8 +8/(1+r)9 +

108/(1 + r)10which gives a yield to maturity of 6.0%.

I have 2 doubt about the answer.

- why the FV value is not 100 ? why is it 108 ?
- and from the equation, I use my calculator type in FV=108 PV=-87 N=6 PMT=8

and I get CPT I/Y = 12.157 Why the answer give me 6%

Hope you could clarify my doubt. Much appreciated.