Question

Stein Co. issued 17-year bonds two years ago at a coupon rate of 9.1 percent. The bonds make semiannual payments. If these bonds currently sell for 115 percent of par value, what is the YTM

Answer 1

Answer:

YTM is 7.43%

Explanation:

The yield to maturity of a bond can be computed using the rate formula in excel,which is given below:

=rate(nper,pmt,-pv,fv)

the nper is the number of coupon interest the bond would pay before it is redeemed at maturity starting from ,which is 15 years multiplied by 2=30

the pmt is the semiannual coupon payable by the bond,which is $1000*9.1%/2=$45.5

the pv is the price of the bond which is 115%*$1000=$1150

the fv is the face value of the bond at $1000

=rate(30,45.5,-1150,1000)=3.715%

The rate of 3.715% is a semi annual rate

annual rate 7.43%(3.715%*2)