A 15 year bond currently sells at par. It offers semi-annual payments and the payment is...

A 15 year bond currently sells at par. It offers semi-annual payments and the payment is $36. What is the yield to maturity of this bond? Please answer Using Excel!!!

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Expert Solution

Please see the attached shreenshot of the solution using excel.

The rate of 3.6% obtained through IRR function or RATE function is the effective semi-annual rate.

The yield to maturity = 3.6% * 2 = 7.25 per year compounded semiannually

or in the effective annual terms it is (1 + 0.036)^2 - 1 = 1.073296 - 1 = 7.3296% per year compounded annually.

This screenshot shows the formula in the excel sheet.

Let me know if you need to understand further. I am happy to help you :-)

jeff jeffy answered 1 year ago

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