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Homework answers / question archive / A bond is currently selling in the market for $ 1,170

A bond is currently selling in the market for $ 1,170

Finance

A bond is currently selling in the market for $ 1,170. It has a coupon of 12% with 15 years maturity that pay annual interest payment. Calculate the yield to maturity for the bonds.

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Computation of Yield to Maturity of the Bonds using Rate Function in Excel:

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

Here,

Rate = Yield to Maturity = ?

Nper = 15 years

PMT = $1,000*12% = $120

PV = $1,170

FV = $1,000

Substituting the values in formula:

=rate(15,120,-1170,1000)

Rate or Yield to Maturity = 9.79%

So, Yield to Maturity of the Bonds is 9.79%.

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