Question

 Abner​ Corporation's bonds mature in 25 years and pay 7 percent interest annually. If you purchase the bonds for ​$725​, what is your yield to​ maturity? (round to 2 decimal points)

Answer 1

K = N

Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N

k=1

K =25

725 =∑ [(7*1000/100)/(1 + YTM/100)^k]     +   1000/(1 + YTM/100)^25

k=1

YTM% = 10

Using Calculator: press buttons "2ND"+"FV" then assign

PV =-725

PMT = Par value * coupon %=1000*7/(100)

N =25

FV =1000

CPT I/Y

Using Excel

=RATE(nper,pmt,pv,fv,type,guess)

=RATE(25,-7*1000/(100),725,-1000,,)