The Timberlake-Jackson Wardrobe Co. has 11.7 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 $1,153.60, 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
Par value (or face value)=$1000
Time to maturity or number of periods=11 years
Coupon rate=11.7% and the coupon payments are made annually
Coupon payments=Par value*Coupon rate=$1000*11.7%=$117
Present value of the bond=$1,153.60
Yield to maturity=?
Now, we can calculate the yield to maturity of the bond using
excel.
The yield to maturity of the bond=9.4%
As the present value is a cash outflow, we have taken it as negative in excel.
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