Question

Skolits Corp. issued 15-year bonds 2 years ago at a coupon rate of 7.3 percent. The bonds make semiannual payments. If these bonds currently sell for 103 percent of par value, what is the YTM?

Answer 1

Answer:

6.94%

Explanation:

The yield to maturity can be computed using excel rate function found below:

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

nper is the coupons that bond has left to pay i.e 26 semiannual coupons in 13 years

pmt is the semiannual coupon amount i.e $1000*7.3%*6/12=36.5

pv is the current market price i.e 103%*$1000=$1030

fv is the face value of $1000

=rate(26,36.5,-1030,1000)=3.47%

semiannual yield =3.47%

annual yield =3.47% *2=6.94%