Question

Soo Lee Imports issued 17-year bonds 2 years ago at a coupon rate of 10.3 percent. The bonds make semiannual payments. These bonds currently sell for 102 percent of par value. What is the yield-to-maturity? (You can use the shortcut formula from cheat sheet)

Answer 1

10.04%

Step-by-step explanation:

For computing the yield to maturity we use the RATE formula i.e to be shown in the attachment below:

Given that,

Present value = $1,000 × 102% = $1,020

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

PMT = 1,000 × 10.3% ÷ 2 = $51.5

NPER = 17 years - 2 years × 2 = 30 years

The formula is shown below:

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

The present value come in negative

After applying the above formula, the yield to maturity is

= 5.02% × 2

= 10.04%