A 6% coupon bond Which face value $1000, Maturity of five years
and paying semi-annual coupon payment sales of $1050
A) What is yield to maturity.
b) what would happen if yield to maturity if it’s price suddenly falls to $900.
The yield to maturity can be found using RATE function in EXCEL
Here the payments are semi-annual
nper=2*5=10 (Total 5 years)
Semi-annual yield to maturity=2.43%
Annual yield to maturity=2*2.43%=4.86%
2. If price falls to 900, then
Semi-annual yield to maturity=4.25%
Annual yield to maturity=2*4.25%=8.50%
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