Broke Benjamin Co. has a bond outstanding that makes semiannual payments with a coupon rate of 6.4 percent. The bond sells for $
1,066.57 and matures in 22 years. The par value is $1,000. What is the YTM of the bond?
1 answer:
Answer:
5.86%
Explanation:
In this question, we use the RATE formula i.e to be shown in the spreadsheet below:
Given that,
Present value = $1066.57
Future value or Face value = $1,000
PMT = 1,000 × 6.4% ÷ 2 = $32
NPER = 22 years × 2 = 44 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
= 2.93% × 2
= 5.86%
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