A 20-year maturity bond with face value of $1,000 makes annual coupon payments and has a coupon rate of 9.40%. (Do not round int
1 answer:
Answer and Explanation:
The computation of the yield to maturity is shown below:
a. When the bond sale price is $1,040
Given that
FV = $1,000
PV = $1,040
PMT = $1,000 × 9.40% = $94
NPER = 20
The formula is shown below:
= RATE(NPER;PMT;-PV;FV;TYPE)
After applying the above formula, the yield to maturity is 8.9630%
b. When the bond sale price is $1,000
Given that
FV = $1,000
PV = $1,000
PMT = $1,000 × 9.40% = $94
NPER = 20
The formula is shown below:
= RATE(NPER;PMT;-PV;FV;TYPE)
After applying the above formula, the yield to maturity is 9.4%
c. When the bond sale price is $1,240
Given that
FV = $1,000
PV = $1,240
PMT = $1,000 × 9.40% = $94
NPER = 20
The formula is shown below:
= RATE(NPER;PMT;-PV;FV;TYPE)
After applying the above formula, the yield to maturity is 7.1144%
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