Question

bear a coupon of 6 percent, payable semiannually. The bond matures in 20 years and has a $1,000 face value. Currently, the bond sells at $955. The yield to maturity (YTM) is

Answer 1

6.4022%

Step-by-step explanation:

The computation of the yield to maturity is as follows;

Here we applied the RATE formula

Given that

NPER = 20 × 2 = 40

PMT = $1,000 × 6% ÷ 2 = $30

PV = $955

FV = $1,000

The formula is shown below

= RATE(NPER;PMT;-PV;FV;TYPE)

The present value comes in negative

After applying the above formula, the yield to maturity is

= 3.2011% × 2

= 6.4022%