Question

a. What is the yield to maturity on a bond that you purchased for $1,204, assuming that the bond has 14 years to maturity, a par value of $1,000, and a coupon rate of 5.90%? The bond pays coupon interest semiannually. (Round your answer to 4 decimal places.)

Answer 1

3.98%

Step-by-step explanation:

For determining the yield to maturity we have to applied the RATE formula which is to be shown in the attachment below:

Given that,

Present value = $1,204

Future value or Face value = $1,000

PMT = 1,000 × 5.90% ÷ 2 = $20

NPER = 14 years × 2 = 28 years

The formula is shown below:

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

The present value come in negative

So, applying the formula the yield to maturity is

= 1.99% × 2

= 3.98%