(Yield to maturity) The market price is $725 for a 16-year bond ($1 comma 000 par value) that pays 9 percent annual inter
est, but makes interest payments on a semiannual basis (4.5 percent semiannually). What is the bond's yield to maturity?
1 answer:
Answer:
13.16%
Explanation:
In this question we use the RATE formula i.e shown in the attached spreadsheet
Given that,
Present value = $725
Assuming figure - Future value or Face value = $1,000
PMT = 1,000 × 9% ÷ 2 = $45
NPER = 16 years × 2 = 32 years
The formula is shown below:
= Rate(NPER;PMT;-PV;FV;type)
The present value come in negative
So, after solving this, the yield to maturity is 6.58% × 2 = 13.16%
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