Question

The Arnold National Bank has a bond portfolio that consists of bonds with 5 years to maturity and a 9% coupon rate. These bonds are selling in the market for $1126. Coupon payments are made annually on this bond. What is the yield to maturity on these bonds?

Answer 1

6.01%

Step-by-step explanation:

We use the RATE formula to determine the yield to maturity that is shown in the attachment

Given that,

Present value = $1,126

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

PMT = 1,000 × 9% = $90

NPER = 5 years

The formula is shown below:

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

The present value come in negative

Therefore, the yield to maturity is 6.01%