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The market price is ​$1,050 for a 9​-year bond ​($1,000 par​value) that pays 9 percent...

The market price is $1,050 for a 9-year bond ($1,000 par value) that pays 9 percent annual interest, but makes interest payments on a semiannual basis (4.5 percent semiannually). What is the bond's yield to maturity?

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Expert Solution

Face Value of Bond = $1000

Semi-annual Coupon Payment = $1000*9%*1/2 = $45

No of Coupon payments = 9 years*2 = 18

Current Price = $1050

Calculating the Semi-annual Yield to maturity(YTM) of Bond using the Excel"RATE" function:-

Semi-annual Yield to maturity(YTM) is 4.1018%

Annual Yield to maturity(YTM) = 4.1018%*2

YTM = 8.20%

So, the​ bond's yield to​ maturity is 8.20%

jeff jeffy answered 2 years ago
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