Question

Broke Benjamin Co. has a bond outstanding that makes semiannual payments with a coupon rate of 5.8 percent. The bond sells for $997.27 and matures in 16 years. The par value is $1,000. What is the YTM of the bond?

Answer 1

YTM of the bond is 5.82%

Step-by-step explanation:

The yield to maturity can be calculated using the rate formula in excel ,given as =rate( nper,pmt,-pv,fv)

nper is the number of times during the bond life coupon interest would be paid,which is 16 years multiplied by 2=32

pmt is the semi annual payment of the bond which is 5.8%*$1000/2=$29

pv is the current price of the bond $997.27

fv is the face value of the bond which is $1000

=rate(32,29,-997.27,1000)

rate=2.91%

that is semi-annual yield to maturity

annual yield is 2.91%*2=5.82%