Question

"Home Depot has a bond with a coupon rate of 7.5 percent that matures in 8 years. The bonds have a par value of $1,000 and a market price of $872. Interest is paid semiannually. What is the yield to maturity

Answer 1

9.84%

Step-by-step explanation:

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

Given that,

Present value = $872

Future value or Face value = $1,000

PMT = 1,000 × 7.5% ÷ 2 = $37.5

NPER = 8 years × 2 = 16 years

The formula is shown below:

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

The present value come in negative

After applying this formula the yield to maturity is

= 4.92% ×2

= 9.84%