The market price is ?$825for a 16?-year bond ($1,000 par? value) that pays 11 percent annual? interest, but makes interest payments on a semiannual basis ?(5

Finance Mar 02, 2021

The market price is ?$825for a 16?-year bond ($1,000 par? value) that pays 11 percent annual? interest, but makes interest payments on a semiannual basis ?(5.5percent? semiannually). What is the? bond's yield to? maturity?

Expert Solution

Computation of Bond's Yield to Maturity using Rate Function in Excel:

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

Here,

Rate = Yield to Maturity = ?

Nper = 16 years*2 = 32 Periods

PMT = $1,000*11%/2 = $55

PV = $825

FV = $1,000

Substituting the values in formula:

=rate(32,55,-825,1000)*2

Rate or Yield to Maturity = 13.73%

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