Soprano's Spaghetti Factory issued 12-year bonds two years ago at a coupon rate of 6

Finance Apr 01, 2021

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= %

Expert Solution

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%

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