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Homework answers / question archive / You are considering the purchase of a bond with a 13% coupon rate paid and compounded semi-annually
You are considering the purchase of a bond with a 13% coupon rate paid and compounded semi-annually. The bond will mature in 8 years, and has a P1,000 face value. The bond currently sells for P867. Calculate the annual yield to maturity for this bond. (Round to nearest percentage.) A. 8% B. 9% C. 13% D. 16%
Computation of Yield to Maturity using Rate Function in Excel:
=rate(nper,pmt,-pv,fv)*2
Here,
Rate = Yield to Maturity = ?
Nper = 8 Years*2 = 16 Periods
PMT = 1,000*13%/2 = 65
PV = 867
FV = 1,000
Substituting the values in formula:
=rate(16,65,-867,1000)*2
Rate or Yield to Maturity = 16.01% or 16%
