Assume the market price of a 6-year bond for Margaret Inc

Finance Dec 19, 2020

Assume the market price of a 6-year bond for Margaret Inc. is $1,150, and it has a par value of $1,000. The bond has an annual interest rate of 6% that is paid semiannually. What is the yield to maturity of the bond? The yield to maturity of the bond is %. (Round to two decimal places.)

Expert Solution

Use RATE function in EXCEL to find the yield to maturity

=RATE(nper,pmt,pv,fv,type)

nper=6 years*2=12

pmt=semi-annaul coupon=(coupon rate*face value)/2=(6%*1000)/2=60/2=30

pv=1150

fv=1000

=RATE(12,30,-1150,1000,0)=1.61%

Yield to maturity=2*1.61%=3.23%

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