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Homework answers / question archive / Soprano's Spaghetti Factory issued 12-year bonds two years ago at a coupon rate of 6
Soprano's Spaghetti Factory issued 12-year bonds two years ago at a coupon rate of 6.40 percent. If these bonds currently sell for 103.65 percent of par value, what is the YTM? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
YTM= %
Computation of YTM using Rate Function in Excel:
=rate(nper,pmt,-pv,fv)
Here,
Rate = YTM = ?
Nper = 12 years - 2 years = 10 years
PMT = $1,000*6.40% = $64
PV = 1000*103.65% = $1,036.50
FV = 1000
Substituting the values in formula:
=rate(10,64,-1036.50,1000)
Rate or YTM = 5.91%
