Andy Williams is interested in buying some bonds of Batty Corp

Finance Jan 26, 2021

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?

Expert Solution

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%

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