Homework Answers
Using the RATE function in Excel:
=RATE(nper,pmt,pv,fv)
where,
nper is 20 years*2 = 40
pmt is 15%/2 * 1000 = 75
pv is current price of bond = 1300
fv is 1000
=RATE(40,-75,1300,1000)
=3.833% is semiannual rate
Annual rate = 3.833%* 2 = 7.67%
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