Question
In: Finance
The market price is $725 for a 9-year bond ($1000 par value) that pays 11 percent...
The market price is $725 for a 9-year bond ($1000 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? (round to the nearest cent)
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Answer:
| Face value (FV) | $ 1,000 |
| Coupon rate | 11.00% |
| Number of compounding periods per year | 2 |
| Interest per period (PMT) | $ 55.00 |
| Bond price (PV) | $ (725.00) |
| Number of years to maturity | 20 |
| Number of compounding periods till maturity (NPER) | 18 |
| Bond Yield to maturity | RATE(NPER,PMT,PV,FV)*2 |
| Bond Yield to maturity | 17.09% |
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