A company issues bonds at a market price of $1,200

Finance Aug 30, 2020

A company issues bonds at a market price of $1,200. The face value is $1,000. The bonds mature in 10 years and the coupon rate is 8% compounded annually. What is the yield to maturity on the company's bonds?

Expert Solution

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

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

Here,

Rate = Yield to maturity

Nper = 10 periods

Pmt = Coupon payment = $1,000*8% = $80

PV = $1,200

FV = $1,000

Substituting the values in formula:

= rate(10,80,-1200,1000)

= 5.36%

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