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In: Finance

The Brownstone Corporation's bonds have 4 years remaining to maturity. Interest is paid annually, the bonds...

The Brownstone Corporation's bonds have 4 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 10%.

  1. What is the yield to maturity at a current market price of $880? Round your answer to two decimal places.
    %
  2. What is the yield to maturity at a current market price of $1,129? Round your answer to two decimal places.
    %

Solutions

Expert Solution

When market price is 880
1- YTM on bond = Using rate function in MS excel rate(nper,pmt,pv,fv,type) nper = 4 pmt =1000*10%=100 pv = 880 fv =1000 type =0 RATE(4,-100,880,-1000,0) 14.13%
When the bond price is 1129
2- YTM on bond = Using rate function in MS excel rate(nper,pmt,pv,fv,type) nper = 4 pmt =1000*10%=100 pv = 1129 fv =1000 type =0 RATE(4,-100,1129,-1000,0) 6.26%


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