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Homework answers / question archive / Andy Williams is interested in buying some bonds of Batty Corp
Andy Williams is interested in buying some bonds of Batty Corp. The bonds have a coupon rate of %12 and mature in 20 years. If the bonds have a par value of $1,000 and are currently selling for $1,160, what is the yield to maturity on the bonds?
Computation of Yield to Maturity of the Bonds using Rate Function in Excel:
=rate(nper,pmt,-pv,fv)
Here,
Rate = Yield to Maturity = ?
Nper = Number of Years to Maturity = 20 years
PMT = Coupon Payment = $1,000*12% = $120
PV = Current Selling Price = $1,160
FV = Face Value = $1,000
Substituting the values in formula:
=rate(20,120,-1160,1000)
Rate or Yield to Maturity = 10.11%
