Question

(1 point) Determine the yield rate y2 for the following bond using the method of averages. State the result as a percent to 4 decimal places Face Value Redeemable at: Bond Interest Years to Redemption Purchase Price 1000 104 C2 = 4.5% 10 965

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

B C Face value Redeemable value Coupon rate Coupon frequency in a year Maturity in years Purchase Price $1,000.00 $1,040.00 4.50% 2. 10 $965.00 Yield to maturity (y2) 5.2637%

Cell reference -

1000 =C2*104% 0.045 Face value Redeemable value Coupon rate Coupon frequency in a year Maturity in years Purchase Price 10 965 Yield to maturity (y2) =2*RATE(C6*2,-C4/2*C2,C7,-C3,0)

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.