Question
In: Finance
The market price is $1,075 for a 19-year bond ($1,000 par value) that pays 11 percent...
The market price is $1,075 for a 19-year bond ($1,000 par value) that pays 11 percent annual interest, but makes interest payments on a semiannual basis (5.5 percent semiannually). What is the bond's yield to maturity?
Solutions
Expert Solution
he yield to maturity of the bond can be calculated with the help of RATE function of Excel
Inputs requied:
N = 19 * 2 = 38
FV = 1000
PMT= 11%/2 * 1000 = 55
PV = 1075
The Rate function is:
=RATE(38,55,-1075,1000,0,0.11)
= 0.0505
The above calculated is the semi annual rate
Annual rate = Semi annual rate * 2
= 0.0505 * 2
= 0.101
Or 10.10%
YTM = 10.10%
jeff jeffy answered 2 years agoRelated Solutions
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