Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / A $5,000 face value municipal bond matures in 10 years and is priced at $4,850
A $5,000 face value municipal bond matures in 10 years and is priced at $4,850. The coupon rate is 4.75% with interest paid semiannually. What is the yield to maturity on the bond?
Multiple Choice
Computation of Yield to Maturity using Rate Function in Excel:
=rate(nper,pmt,-pv,fv)
Here,
Rate = Yield to Maturity = ?
Nper = 10 years * 2 = 20 Periods
PMT = $5,000*4.75%/2 = $118.75
PV = $4,850
FV = $5,000
Substituting the values in formula:
=rate(20,118.75,-4850,5000)*2
Rate or Yield to Maturity = 5.14%
So, the correct option is 4th "5.14%".
