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Elizabeth Brown is looking to invest in a three-year bond that makes semi-annual coupon payments at a rate of 5.675 percent. If these bonds have a market price of $977.11, what yield to maturity can she
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Elizabeth Brown is looking to invest in a three-year bond that makes semi-annual coupon payments at a rate of 5.675 percent. If these bonds have a market price of $977.11, what yield to maturity can she expect to earn?

User Edward Lee
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1 Answer

5 votes

Answer:

The yield to maturity is 6.53%

Step-by-step explanation:

The computation of the yield to maturity is shown below:

Given that

Assume future value be $1,000

The Present value is $977.11

PMT = $1,000 × 5.675% ÷ 2 = $28.375

NPER = 3 × 2 = 6

The formula is given below:

= RATE(NPER;PMT;-PV;FV;TYPE)

The present values comes in negative

After applying the above formula, the yield to maturity is

= 3.263% × 2

= 6.53%

Elizabeth Brown is looking to invest in a three-year bond that makes semi-annual coupon-example-1
User Santanu Bera
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