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The Timberlake-Jackson Wardrobe Co. has 11.2 percent coupon bonds on the market with eleven years left...

The Timberlake-Jackson Wardrobe Co. has 11.2 percent coupon bonds on the market with eleven years left to maturity. The bonds make annual payments and have a par value of $1,000.
  
If the bonds currently sell for $1,157.26, what is the YTM? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Yield to maturity             %


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Answer #1

Par value (or face value)=$1000
Time to maturity or number of periods=11 years
Coupon rate=11.2% and the coupon payments are made annually
Coupon payments=Par value*Coupon rate=$1000*11.2%=$112
Present value of the bond=$1,157.26
Yield to maturity=?
Now, we can calculate the yield to maturity of the bond using excel.

The yield to maturity of the bond=8.9%

Note: As the present value of the bond is a cash out flow, we have taken it as negative in excel.

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