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Answer #1

For the Yield to Maturity, we will have to use the RATE function built in excel.

RATE function in excel requires the following inputs:

Period = Time to maturity = 5 years

Payment = Annual coupon of 7% of par value = 7% x 15,000 = 1,050

PV, Present Value = - Market value of the bond net of floatation cost = -(Par Value - Floatation cost)

= -(15,000 - 15,000 x 2%) = - 14,700

FV = Future value = 15,000

Hence, YTM = RATE(Period, Payment, PV, FV) = RATE(5, 1050,-14700, 15000) = 7.49%

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