Question

Show me the formula please how to do it

A coupon bond that has a $1,000 par value and a coupon rate selling for $1,250 and has eight years to maturity. What is the bond's yield to maturity? (An equation is sufficient.) 3. of 10%. The bond is currently

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

I HAVE GIVEN METHOD OF CALCULATING EXACT YTM. THERE IS APPROXIMATION METHOD ALSO. BUT NO METHOD WAS MENTIONED SO USED EXACT YTM METHOD.

Home nert Page Layout Formulas Data Review View dd-Ins as Cut ta copy ▼ チFormat Painter B l U. ㄧ˙ タ.Δ. -=- 還便困Merge & Center. $,%,,Ma conditional Format Cell Σ AutoSum 11.A. A.--- 9- ー E " ゴText ずWrap Text General Paste Insert Delete Format 2 ClearFe Select Edting Clipboard Font Alignment Number Styles Cells PV26 PL PM PN PO PQ PIHE PS PT PU PV PW IPK PY P2 24 25 26 27 28 29 30 31 32 PRESENT VALUE OF BOND- COUPON X PVI FA@ r%, 8 YEARS + MATURITY VALUE X PVIF@1%, 8 YEARS 100 X PVI FA@ 1%, 8 YEARS + 1000 X PVIF@1%, 8 YEARS 1250 = WE HAVE TO SOLVE THIS USING TRIAL AND ERROR METHOD AS CURRENT PRICE IS HIGHER THAN FACE VALUE, THE BOND HAS A YTM LOWER THAN COUPON RATE TAKE-8% PRESENT VALUE OF BOND AT 896 = TAKE-6% PRESENT VALUE OF BOND AT 6% = TAKE r = 5% PRESENT VALUE OF BOND AT 5% 100 X 5.7466 + 1000 x 0.5403-1114.96 PVIFA & PVIF VALUES TAKEN FROM TABLES ROUNDED TO 4 DECIMALS 34 35 36 37 38 39 40 41 42 11 1 トーCALCULATOR 100 X 6.2098 + 1000 x 0.6274 1248.38 100 X 6.4632 + 1 000 x 0.6768 = 1323.12 SO YTM IS BETWEEN 5 & 6, VERY NEAR TO 6% YTM LOWER % + (PV AT 596-PV)/(PV AT 596-PV AT 6%) M- 5+ (1323.12-1250)/(1323.12-1248.38) 5.9783 ANSWER YTM= 5.98% LOAN OPTIONS | pv, fv, annu y i CAP STRU VALUE BOX DILUTION DOLLAR COST AVGMORTGAGE EXPO Sheeti Sheet2 Shel rences: x261 22-01-2019