Question

Yuld to maturity The bond shown in the following table prys interest ruly (Click on the icon located on the top-right comer of the lata table below in order to copy its contents into a spreadsheet) Coupon Interest rate Y ears to maturity Current value 20 $370 Par value $1.000 a. Calculate the yield to maturity (YTM) for the bond. b. What relationship exists between the coupon interest rate and yield to maturity and the par value and market value of a bond? Explain. The yield to maturity (YTM) for the bond is (Round to two decimal places) b. What relationship exists between the coupon interest rate and you to maturity and the par value and market value of a bond? Explain. Select the best answer below.) O A. The market value of the bond approaches the per value as the time to maturity declines. The yield-to-maturity approaches the coupon Interest rate as the time to maturity increases OB. The market value of the bord approaches its par value as the time to maturity increases. The yield-to-matunty approaches the coupon interest rate as the time to maturity increases OC. The market value of the bord approaches its par value as the time to maturity declines. The yield-to-maturity approaches the coupon Interest rate as the time to maturity declines. OD. The market value of the bond approaches its par value as the time to maturity increases. The yield to maturity proaches the coupon interest rate as the time to maturity declines

Answer 1

YTM is calculated using the RATE function:-

=RATE(npet,pmt,pv,fv)

=RATE(20,5%*1000,-370,1000)

=15.15%

The market value of the bond approaches its par value as the time to maturity DECLINES. The yield to maturity approaches the coupon interest rate as the time to maturity DECLINES.