Question

Solo Corp. has a bond with value interest payment of $270 maturing in 12 years at a value of $1,000 per bond. The current market price is $910. what will the nominal yield be?

Answer 1

YTM :
YTM is the rate at which PV of Cash inflows are equal to Bond price when the bond is held till maturity.

YTM = Rate at which least +ve NPV + [ NPV at that Rate / Change in NPV due to 1% inc in disc rate ] * 1%

Year	CF	PVF @29%	Disc CF	PVF @30%	Disc CF
0	$ -910.00	1.0000	$ -910.00	1.0000	$ -910.00
1	$    270.00	0.7752	$ 209.30	0.7692	$ 207.69
2	$    270.00	0.6009	$ 162.25	0.5917	$ 159.76
3	$    270.00	0.4658	$ 125.78	0.4552	$ 122.89
4	$    270.00	0.3611	$    97.50	0.3501	$    94.53
5	$    270.00	0.2799	$    75.58	0.2693	$    72.72
6	$    270.00	0.2170	$    58.59	0.2072	$    55.94
7	$    270.00	0.1682	$    45.42	0.1594	$    43.03
8	$    270.00	0.1304	$    35.21	0.1226	$    33.10
9	$    270.00	0.1011	$    27.29	0.0943	$    25.46
10	$    270.00	0.0784	$    21.16	0.0725	$    19.59
11	$    270.00	0.0607	$    16.40	0.0558	$    15.07
12	$    270.00	0.0471	$    12.71	0.0429	$    11.59
12	$ 1,000.00	0.0471	$    47.09	0.0429	$    42.92
NPV	$    24.28		$     -5.71

YTM = Rate at which least +ve NPV + [ NPV at that Rate / Change in NPV due to 1% inc in disc rate ] * 1%

= 29% + [ 24.28 / 29.99 ]

= 29% + [ 0.81 * 1% ]

= 29.81%

Nominal yield is 29.81%

Pls do rate, if the answer is correct and comment, if any further assistance is required.