In: Finance
A bond has a 11% coupon rate with semi-annual coupons and matures in 9 years. The bond has a $1,000 face value and a current yield of 14.37%.
What is the bond's price?
What is the bond's yield to maturity? Enter your answer as a decimal.
a. | Bond's Price | $ 765.48 | ||||||||
Working; | ||||||||||
# 1 | Annual coupon payment | = | Face value * Coupon rate | |||||||
= | $ 1,000.00 | * | 11% | |||||||
= | $ 110.00 | |||||||||
# 2 | Bond's Price | = | Annual coupon payment / current yield | |||||||
= | $ 110.00 | / | 14.37% | |||||||
= | $ 765.48 | |||||||||
b. | Yield to maturity | 0.1601 | ||||||||
Working; | ||||||||||
Yield to maturity | = | =rate(nper,pmt,-pv,fv)*2 | ||||||||
= | 0.1601 | |||||||||
Where, | ||||||||||
nper | Number of period | = | 18 | |||||||
pmt | Coupon payment | = | $ 55.00 | |||||||
pv | Current price | = | $ 765.48 | |||||||
fv | Face value | = | $ 1,000.00 | |||||||