Question

You just purchased a bond that matures in 12 years. The bond has a face value of $1,000 and has an 7% annual coupon. The bond has a current yield of 5.74%. What is the bond's yield to maturity? Round your answer to two decimal places

Answer 1

4.58%

Step-by-step explanation:

In this question, we use the Rate formula which is shown in the spreadsheet.

The NPER represents the time period.

Given that,

Present value = ($1,000 × 7%) ÷ 5.74% = $1,219.52

Assuming figure - Future value or Face value = $1,000

PMT = 1,000 × 7% = $70

NPER = 12 years

The formula is shown below:

= Rate(NPER,PMT,-PV,FV,type)

The present value come in negative

So, after solving this, the answer would be 4.58%