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​A(n) 15​-year bond for Rusk Corporation has a market price of $ 750 and a par...

​A(n) 15​-year bond for Rusk Corporation has a market price of $ 750 and a par value of $ 1000. If the bond has an annual interest rate of 7 ​percent, but pays interest​ semiannually, what is the​ bond's yield to​ maturity? The​ bond's yield to maturity is ___%.

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Answer #1

Face value=$1000
Present value of the bond=$750
Annual coupon interest rate=7%
As the interest is paid semiannually, semiannual coupon rate=7%/2=3.5%
Coupon payment=Semiannual coupon rate*Face value=3.5%*$1000=$35

Time to maturity=15 years, as the interest is paid semiannually, number of periods=15*2=30
Yield to maturity=?
We can calculate the yield to maturity using excel.


As the present value is a cash outflow, it is shown as negative in excel.
Semiannual yield to maturity=5.16%
Annual yield to maturity=5.16%*2=10.32%

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