Question

Calculate the yield to maturity on the following bonds: a. A 8.2 percent coupon (paid semiannually) bond, with a $1,000 face value and 22 years remaining to maturity. The bond is selling at $895. b. An 5.3 percent coupon (paid quarterly) bond, with a $1,000 face value and 10 years remaining to maturity. The bond is selling at $915. c. An 7.3 percent coupon (paid annually) bond, with a $1,000 face value and 8 years remaining to maturity. The bond is selling at $1,065. (For all requirements, do not round intermediate calculations. Round your answers to 3 decimal places. (e.g., 32.161))

Answer 1

Yield to maturity:

* van toeRATE(22*2,1000*8.2%/2,-895,1000) Function Arguments ? X RATE Nper 22*2 Pmt 1000*8.2%/2 -895 1000 Type = 44 = 41 = -895 = 1000 Pv Fv * ELE = number = 0.046660344 Returns the interest rate per period of a loan or an investment. For example, use 6%/4 for quarterly payments at 6% APR. Fv is the future value, or a cash balance you want to attain after the last payment is made. If omitted, uses Fv = 0. Formula result = 0.046660344 Help on this function OK Cancel

Semiannual rate = 4.66603%.

Yield to maturity = 4.66603%*2 = 9.332%.

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b.

Yield to maturity:

X in for ERATE(10*4,1000*5.3%/4,-915,1000) Function Arguments ? x RATE Nper 10*4 Pmt 1000*5.3%/4 Pv-915 Fv_1000 5 = 40 = 13.25 = -915 = 1000 = number 5 Type E = 0.016151373 Returns the interest rate per period of a loan or an investment. For example, use 6%/4 for quarterly payments at 6% APR. Fv_ is the future value, or a cash balance you want to attain after the last payment is made. If omitted, uses Fv = 0. Formula result = 1.61514% Help on this function OK Cancel

c.Quarterly rate = 1.61514%.

Yield to maturity is 1.61514%*4 = 6.461%.

Yield to maturity:

- X W X =RATE(8,1000*7.3%,-1065,1000) Function Arguments ? X RATE . Nper 8 Pmt 1000*7.3% -1065 Fv_1000 Type = 8 = 73 = -1065 = 1000 * E = number = 0.0624317 Returns the interest rate per period of a loan or an investment. For example, use 6%/4 for quarterly payments at 6% APR. Fv is the future value, or a cash balance you want to attain after the last payment is made. If omitted, uses Fv = 0. Formula result = 6.24317% Help on this function OK Cancel

Yield to maturity = 6.243%.