Question

Bavarian sausage just issued a 7 year 8% coupon bond. the face value of the bond is 1,000 and the bond makes annual coupon payments. If the bond is trading at $1006.83, what is the bond’s yield to maturity?

Answer 1

Hello Sir/ Mam

YOUR REQUIRED ANSWER IS 7.87%

Given that:

n = 7 years

Coupon Rate = 8%

Present Value = $1,006.83

Future Value = $1,000

Using excel formula, "=RATE(7,80,-1006.83,1000,0)", we can easily calculate YTM = 7.87%

I hope this solves your doubt.

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