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1) Calculate the yield to maturity for the following bonds
1) Calculate the yield to maturity for the following bonds.
a) 3-year Canada 5.50% semi-annual, priced at 98.14
Mode=
N=
P/Y =
C/Y=
PMT=
FV=
PV =
I/Y=
b) 11-year Canadian Tire 12.10% annual, priced at 139.20
Mode=
N=
P/Y =
C/Y=
PMT=
FV=
PV =
I/Y=
Expert Solution
a). Computation of the yield to maturity :-
Number of periods = 3*2 = 6 periods (semiannual)
Coupon payment = 100*5.50%/2 = 2.75
PV = 98.14
FV = 100
Lets put the value in calculator:
Mode = END
N= 4
P/Y = 2
C/Y = 2
PMT = 2.75
PV = 98.14
FV = 100
CPT - I/Y = 6.19%
Or you can calculate the yield to maturity by using excel formula:
=rate(nper,pmt,-pv,fv)*2
= rate(6,2.75,-98.14,100)*2
= 6.19%
b). Computation of the yield to maturity :-
Number of periods = 11 periods
Coupon payment = 100*12.10% = 12.10
PV = 139.20
FV = 100
Lets put the value in calculator:
Mode = END
N= 11
P/Y = 1
C/Y = 1
PMT = 12.10
PV = 139.20
FV = 100
CPT - I/Y = 6.90%
Or you can calculate the yield to maturity by using excel formula:
=rate(nper,pmt,-pv,fv)
= rate(11,12.10,-139.20,100)
= 6.90%
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