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Dan is considering the purchase of Super Technology, Inc
Dan is considering the purchase of Super Technology, Inc. bonds that were issued 3 years ago. When the bonds were originally sold they had a 24-year maturity and a 6.19 percent coupon interest rate, paid annually. The bond is currently selling for $882. Par value of the bond is $1,000. What is the yield to maturity on the bonds if you purchased the bond today?
Expert Solution
Computation of Yield to Maturity using Rate Function in Excel:
=rate(nper,pmt,-pv,fv)
Here,
Rate = Yield to Maturity = ?
Nper = 24 years-3 Years = 21 Years
PMT = $1,000*6.19% = $61.90
PV = $882
FV = $1,000
Substituting the values in formula:
=rate(21,61.90,-882,1000)
Rate or Yield to Maturity = 7.31%
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