Last year Clark Company issued a 10-year, 11% semiannual coupon bond at its par value of $1,000

Finance Oct 24, 2020

Last year Clark Company issued a 10-year, 11% semiannual coupon bond at its par value of $1,000. Currently, the bond can be called in 4 years at a price of $1,050 and it sells for $1,080. What is the nominal yield to maturity? Answer as a percentage with 2 decimals (ex. 10.00%).

Expert Solution

Computation of Nominal Yield to Maturity using Rate Function in Excel:

=rate(nper,pmt,-pv,fv)*2

Here,

Rate = Nominal Yield to Maturity = ?

Nper = 10 years * 2 = 20 periods

PMT = $1,000*11%/2 = $55

PV = $1,080

FV = $1,000

Substituting the values in formula:

=rate(20,55,-1080,1000)*2

Rate or Nominal Yield to Maturity = 9.73%

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