Kempton Enterprises has bonds outstanding with a $1,000 face value and 10 years left until maturity. They have an 10% annual cou

Question

3 years ago

11

Kempton Enterprises has bonds outstanding with a $1,000 face value and 10 years left until maturity. They have an 10% annual cou

pon payment, and their current price is $1,175. The bonds may be called in 5 years at 109% of face value (Call price = $1,090). What is the yield to maturity? Round your answer to two decimal places.

Business

1 answer:

viva [34] · Answer 1 · 2022-02-24T23:06:04+03:00

Answer:

YTM is 7.46%

Explanation:

Given:

Face value of bond (FV) = $1,000

Years to maturity (nper) = 10

Coupon rate = 10%

Coupon payment (pmt) = $100 (0.1×1,000)

Price of bond (PV) = $1,175

If the bonds are held till maturity, then yield to maturity is calculated using excel function =Rate(nper,pmt,PV,FV)

Yield of bond if held till maturity is 7.46%