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Homework answers / question archive / A bond with 20 years remaining until maturity is currently trading for $1,110 per $1000 of par value
A bond with 20 years remaining until maturity is currently trading for $1,110 per $1000 of par value. the bond offers a 5% coupon rate with interest paid semiannually. What is the bond's annual yield-to maturity?
Face Value of Bond = $1000
Semi-annual coupon payment = $1000*5%*1/2 = $25
No of coupon Payment = No of years to maturity*2 = 20 years*2
= $40
Current Price = $1110
Calculating the Semi-Annual Yield to maturity of Bond using the Excel "RATE" function:-
Semi-Annual Yield to maturity = 2.0914%
Annual Yield to maturity = 2.0914%*2
Annual Yield to maturity = 4.18%
So, the bond's annual yield-to maturity is 4.18%
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