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7 October, 14:16

g The $1,000 face value bonds of Trident Corporation have coupon of 5.5 percent and pay interest semiannually. Currently, the bonds are quoted at 98.02 and mature in 12 years. What is the yield to maturity

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  1. 7 October, 14:37
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    The answer is 5.73%

    Explanation:

    Given Coupon rate=5.5%; Years of maturity = 12years, Face value bonds = $1,000, Price=98.2

    NPER = Years of maturity * 2 = 12*2=24

    PMT = (Face value * coupon rate) / 2 = (1000*5.5) / 2 = 5500/2 = 2.75

    Therefore:

    Rate = (NPER, PMT, - Price, Face value) = (24, 2.75, - 98.2, 1000) = 2.87%

    Yield to maturity = Rate * 2 = 2.87*2 = 5.73%
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