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What is the yield to maturity (total yield) on a $1,000 bond selling for 113
What is the yield to maturity (total yield) on a $1,000 bond selling for 113.42 if the bond has a coupon rate of 9% and matures in ten years?
Expert Solution
Computation of Yield to Maturity using Rate Function in Excel:
=rate(nper,pmt,-pv,fv)
Here,
Rate = Yield to Maturity = ?
Nper = 10 years
PMT = $1,000*9% = $90
PV = $1,000*113.42% = $1,134.2
FV = $1,000
Substituting the values in formula:
=rate(10,90,-1134.20,1000)
Rate or Yield to Maturity = 7.08%
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