Homework Answers
YTM is calculated using RATE function in Excel :
nper = 15 (years remaining until maturity with 1 annual coupon payment each year)
pmt = 120 (annual coupon payment)
pv = -1250 (Current price of bond. This is entered with a negative sign because it is a cash outflow to buy the bond today).
fv = 1000 (face value of bond receivable at maturity).
RATE is calculated to be 8.91%. This is the YTM.
YTC is calculated using RATE function in Excel :
nper = 5 (years remaining until call with 1 annual coupon payment each year)
pmt = 120 (annual coupon payment)
pv = -1250 (Current price of bond. This is entered with a negative sign because it is a cash outflow to buy the bond today).
fv = 1050 (call price of bond receivable at call).
RATE is calculated to be 6.81%. This is the YTC.
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