Question

Oriole, Inc., has four-year bonds outstanding that pay a coupon rate of 6.20 percent and make coupon payments semiannually. If these bonds are currently selling at $920.89. What is the yield to maturity that an investor can expect to earn on these bonds

Answer 1

8.58%

Step-by-step explanation:

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

Provided that,

Present value = $920.89

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

PMT = 1,000 × 6.20% ÷ 2 = $31

NPER = 4 years × 2 = 8 years

The formula is shown below:

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

The present value come in negative

So, after applying the formula

The yield to maturity is

= 4.29% × 2

= 8.58%