Suppose a ten-year, $1,000 bond with an 8.0 % coupon rate and semiannual coupons is trading for $1,034.74.
a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)?
b. If the bond's yield to maturity changes to 9.0 % APR, what will be the bond's price?
a) Bond's YTM:
=RATE(nper,pmt,pv,fv)
=RATE(10*2,8%/2*1000,-1034.74,1000)*2
=7.50%
b) Bond's price:
=PV(rate,nper,pmt,fv)
=PV(9%/2,10*2,8%/2*1000,1000)
=934.96
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