Question

suppose you buy a 15 year 4% bond for $940. What is the yield to maturity for this bond? State answer as a percentage please and show work. Semi annual bond

Answer 1

Face/Par Value of bond = $1000

Semi-Annual Coupon Bond = $1000*4%*1/2

= $20

No of Coupon payment =No of years to maturity*2 = 15 years*2

= 30

Current price = $940

Calculating the Semi-annual Yield to Maturity using the Excel "RATE" function:-

Semi-annual Yield to Maturity = 2.2783%

Annual YTM = 2.2783%*2

Annual YTM = 4.56%

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