A corporate bond pays 7% of its face value once per year. If this $10 comma 000 10-year bond sells now for $10 comma 600, w
hat yield will be earned on this bond? Assume the bond will be redeemed at the end of 10 years for $10 comma 000.
1 answer:
Answer:
6.18%
Explanation:
We use the RATE formula i.e to be shown in the attachment below:
Present value = $10,600
Future value or Face value = $10,000
PMT = 10,000 × 7% = $700
NPER = 10 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 6.18%
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