Three years ago you purchased a 12?% coupon bond that pays semiannual coupon payments for ?$970

Finance Feb 12, 2021

Three years ago you purchased a 12?% coupon bond that pays semiannual coupon payments for ?$970. What would be your bond equivalent yield if you sold the bond for current market price of ?$1,046??

Your bond equivalent? yield, if you sold the bond for current market? price, is

nothing

?%. ?(Round to two decimal? places.)

Expert Solution

Computation of Bond's Equivalent? Yield using Rate Function in Excel:

=rate(nper,pmt,-pv,fv)*2

Here,

Rate = Bond's Equivalent? Yield = ?

Nper = 3 years * 2 = 6 Periods

PMT = $1,000*12%/2 = $60

PV = $970

FV = $1,046

Substituting the values in formula:

=rate(6,60,-970,1046)*2

Rate or Bond's Equivalent? Yield = 14.55%

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