Task:
I'm trying to understand a formula in a CPA review book for the calculation of the yield to maturity for bonds. The formula is as follows:
YM = Annual interest payment + Principal Payment -Bond Price /
Number of years to maturity / 0.6 (Price of bond) + 0.4 (Principal payment)
Problem: The factors 0.6 and 0.4 are some type of weighted numbers I believe. However, I'm not sure how they are derived. Are they standard for this calculation or were they calculated somehow somewhere else? The book I'm using doesn't indicate. I'm no longer in school, however, am trying to, on my own, study for the CPA exam.