Answer:
The answer is 6.95%
Explanation:
We are looking for Yield-to-maturity (YTM). YTM can also be called rate of return or discount rate.
Note: The 15 -year bond was bought 2 years ago, meaning it remains 13 years
N(Number of periods) = 26 years ( 13years x 2)
I/Y(Yield to maturity) = ?
PV(present value or market price) = $103
PMT( coupon payment) = $3.65( [(7.3percent ÷ 2)x $100)]
FV( Future value or par value) = $100
We are using a Financial calculator for this.
N= 26; PMT = 3.65; FV= $100; CPT PV= -103, CPT I/Y
I/Y = 3.47.
3.47% is for semiannual rate
Therefore, annual rate is 6.95% (3.47% x 2)
