Question

ExxonMobil 13​-year bonds pay 11 percent interest annually on a $1,000 par value. If the bonds sell at $750 what is the​ bonds' expected rate of​ return?

The​ bonds' expected rate of return is____%

Answer 1

K = N

Bond Price =∑ [(Annual Coupon)/(1 + YTM)^k]     +   Par value/(1 + YTM)^N

k=1

K =13

750 =∑ [(11*1000/100)/(1 + YTM/100)^k]     +   1000/(1 + YTM/100)^13

k=1

YTM% = 15.6