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Homework answers / question archive / You notice in the WSJ a bond that is currently selling in the market for $1,065 with a coupon of 11 % and a(n) 20-year maturity
You notice in the WSJ a bond that is currently selling in the market for $1,065 with a coupon of 11 % and a(n) 20-year maturity. Using annual compounding, calculate the promised yield on this bond.
The bond's promised yield is
%. (Round to two decimal places.)
Computation of Bond's Promised Yield using Rate Function in Excel:
=rate(nper,pmt,-pv,fv)
Here,
Rate = Bond's Promised Yield = ?
Nper = 20 years
PMT = $1,000*1
1% = $110
PV = $1,065
FV = $1,000
Substituting the values in formula:
=rate(20,110,-1065,1000)
Rate or Bond's Promised Yield = 10.22%
So, Bond's Promised Yield is 10.22%.
