Question

Crossfade Corp. has a bond with a par value of $2,000 that sells for $1,950.22. The bond has a coupon rate of 6.87 percent and matures in 25 years. If the bond makes semiannual coupon payments, what is the YTM of the bond?

Answer 1

Answer:

Given data:

• Par value or face value = $ 2,000
• Bond price ( present value) = $ 1950.22
• Coupon rate = 6.87 %
• Time period = 25 yrs

Calculation of bond yield to maturity:

Particulars	Amount	Amount
Par value(A)		$ 2,000
Coupon rate (B)	6.87%
Number of compounding periods per year(semi annually)(C)	2
Interest per period( pmt )	= A*B/C =$2,000 *6.87% /2 = $ 137.4 /2 = $ 68.7	$ 68.7
Bond price		$1950.22
Number of years to maturity	25
Number of compounding periods till maturity(NPER)	50
Bond yield to maturity	RATE(NPER,PMT,-PV,FV)*2 0.070838*100 [ FROM EXCEL ] 7.0838	7.0838%

Therefore ,the bond yield to maturity is 7.0838%