Question

a 1,000 par value bond has a 9% coupon rate and currently sells for 900. the bond matues in 5 years. what is the bonds antipcated yeild?

Answer 1

Par value = 1000

coupon rate = 9%

coupon = coupon rate * par value = 9%*1000 = 90

Maturity of bond = 5 years

price of bond = 900

anticipated yield can be calculated using the RATE function in spreadsheet

RATE(number of periods, payment per period, present value, future value, when-due, rate guess)

Where, number of periods = maturity of bond = 5

payment per period = coupon = 90

present value = price of bond = 900

future value = par value = 1000

when-due = when is the coupon payment made each year = end = 0

rate guess = guess of yield = 10%

anticipated yield = RATE(5, 90, -900, 1000, 0, 10%) = 11.7574%