Melissa Price bought a 15-year bond issued by Kroger ten yearsago for $1,013.09. The bond...

Melissa Price bought a 15-year bond issued by Kroger ten years ago for $1,013.09. The bond makes semiannual coupon payments at a rate of 10.4 percent. If the current price of the bonds is $976.29, what is the yield that Melissa would earn by selling the bond today?

PLEASE FIND THE FOLLOWING

n =

i =

PV =

PMT =

FV =

Solutions

Expert Solution

The yield is computed as follows:

n = 20 (10 x 2)

PV = - 1,013.09

FV = 976.29

PMT = 52 (10.4% / 2 x 1,000)

It will give us i or yield equal to 5.023226158%

Since the bond is a semi annual bond, we will multiply the above rate by 2 as follows:

= 5.023226158% x 2

= 10.05%

jeff jeffy answered 2 years ago

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