Question

​(Yield to​ maturity) The market price is ​$725 for a 16​-year bond ​($1 comma 000 par​ value) that pays 9 percent annual​ interest, but makes interest payments on a semiannual basis ​(4.5 percent​ semiannually). What is the​ bond's yield to​ maturity?

Answer 1

13.16%

Step-by-step explanation:

In this question we use the RATE formula i.e shown in the attached spreadsheet

Given that,

Present value = $725

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

PMT = 1,000 × 9% ÷ 2 = $45

NPER = 16 years × 2 = 32 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 6.58% × 2 = 13.16%