A 10% new-issued noncallable coupon bond with annual payments was purchased on the New Year's Day of 2017 and has a Par value of $1,000

Finance Aug 06, 2020

A 10% new-issued noncallable coupon bond with annual payments was purchased on the New Year's Day of 2017 and has a Par value of $1,000.00 due on the New Year's Day of 2030. If the bond was first sold for $970.00, then the yield to maturity would be _____

Expert Solution

We can calculate the yield to maturity of the bond by using the following formula in excel:-

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

Here,

Rate = Yield to maturity

Nper = (2030 - 2017) = 13 periods

Pmt = Coupon payment = $1,000*10% = $100

PV = $970

FV = $1,000

Substituting the values in formula:

= rate(13,100,-970,1000)

= 10.43%

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