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Homework answers / question archive / A $50,00 9% (6 month interest) bond is purchased by a dealer for $51,880
A $50,00 9% (6 month interest) bond is purchased by a dealer for $51,880. What is its yield, if interest is paid 6 monthly?
Computation of Yield to Maturity using Rate Function in Excel:
=rate(nper,pmt,-pv,fv)*2
Here,
Rate = Yield to Maturity = ?
Nper = 2
PMT = 50,000*9%/2 = $2,250
PV = $51,880
FV = $50,000
Substituting the values in formula:
=rate(2,2250,-51880,50000)*2
Rate or Yield to Maturity = 5.10%
