Question

What is the yield to maturity (rounded to the nearest whole percent) of a 20 year, $100 par value bond, that pays a 10% coupon semi-annually, given that the bond's current market price is $85

Answer 1

the yield to maturity is 12%

Step-by-step explanation:

The computation of the yield to maturity is as follows

Given that

Future value is $100

Present value is $85

PMT = $100 × 10% ÷ 2 = $5

NPER = 20 × 2 = 40

The formula is given below:

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

The present value comes in positive

After applying the above formula, the yield to maturity is

= 6% × 2

= 12%

Hence, the yield to maturity is 12%