Question

West Corp. issued 20-year bonds two years ago at a coupon rate of 8.6 percent. The bonds make semiannual payments. If these bonds currently sell for 107 percent of par value, what is the YTM? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

Coupon rate = 8.6%

Semi-annual coupon payment = 100 * 0.086/2 = 4.3

Number of coupon payments = 20 * 2 = 40

PV = -107

FV = 100

PMT = 4.3

N = 40

CPT I/Y

I/Y = 3.949014428

YTM = 3.949014428% * 2

YTM = 0.07898028856

YTM = 7.90%

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Answer 2

Answer:

4.93%

Explanation:

We use the Rate formula shown in the spreadsheet for this question

The time period is represented in the NPER.

Provided that,  

Present value = $1,000 × 105% = $1,050

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

PMT = 1,000 × 5.3% ÷ 2 = $26.5

NPER = 25 years - 2 years = 23 years × 2 = 46 years

The formula is shown below:  

= Rate(NPER;PMT;-PV;FV;type)  

The present value come in negative  

So, after solving this, the yield to maturity is 4.93%