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73 Test Your Skills: EJ Corp bond carries a 9 percent coupon, paid semi-annually. The par value is $1,000, and the bond matures in 12 years. If the bond currently sells for $905.50 (PV), what is its yield to maturity? Enter PV as a negative number. Calculate equal 24 payments ($1,000".09/2) and enter. Remember the last payment is the return of principal plus PMT. Use IRR(cash flows). Payment Periods Time Cash F Today 191 192 193 203 204 205 206 Add FV to PMT --> IRR -> 210 211 213 214 The YTM is 2"IRR ---> 215 216 Print your spreadsheets 217 End of Tutorial

Answer 1

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

B $1,000.00 9% Par value of Bond Coupon rate Coupon frequency Current price of Bond Years to maturity 2 $905.50 - 12 Payment Periods 0 1 2 3 5 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Cash Flow -$905.50 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $45.00 $1,045.00 5.20% IRR YTM 10.40%

Cell reference -

А в 1000 0.09 Par value of Bond Coupon rate Coupon frequency Current price of Bond Years to maturity 905.5 12 Payment Periods 1 2 3 4 5 LONDO 10 11 12 13 14 15 16 17 Cash Flow |--C5. =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2 =$C$3/$C$4*$C$2+C2 =IRR(C9:C33) 18 19 20 21 22 23 24 IRR 32 33 34 36 YTM =2*C34

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