Question

Calculate the yield to maturity on the following bonds:

A 9.4 percent coupon (paid semiannually) bond, with a $1,000 face value and 19 years remaining to maturity. The bond is selling at $965.

An 8.4 percent coupon (paid quarterly) bond, with a $1,000 face value and 10 years remaining to maturity. The bond is selling at $901.

An 11.4 percent coupon (paid annually) bond, with a $1,000 face value and 6 years remaining to maturity. The bond is selling at $1,051.

please show and explain all steps on a financial calculator as well

Answer #1

1) | ||||||||

Yield to maturity |
= | =rate(nper,pmt,-pv,fv)*2 | Where, | |||||

= |
9.81% |
nper | 19*12/6 | = | 38 | |||

pmt | 1000*9.4%*6/12 | = | $ 47.00 | |||||

pv | = | $ 965.00 | ||||||

fv | = | $ 1,000.00 | ||||||

2) | ||||||||

Yield to maturity |
= | =rate(nper,pmt,-pv,fv)*4 | Where, | |||||

= |
9.98% |
nper | 10*12/3 | = | 40 | |||

pmt | 1000*8.4%*3/12 | = | $ 21.00 | |||||

pv | = | $ 901.00 | ||||||

fv | = | $ 1,000.00 | ||||||

3) | ||||||||

Yield to maturity |
= | =rate(nper,pmt,-pv,fv) | Where, | |||||

= |
10.84% |
nper | 6 | = | 40 | |||

pmt | 1000*11.4% | = | $ 114.00 | |||||

pv | = | $ 1,051.00 | ||||||

fv | = | $ 1,000.00 |

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