Stein Co. issued 17-year bonds two years ago at a coupon rate of 9.1 percent. The bonds make semiannual payments. If these bonds currently sell for 115 percent of par value, what is the YTM

Question

Julian Stone

Business

1 January, 12:18

Stein Co. issued 17-year bonds two years ago at a coupon rate of 9.1 percent. The bonds make semiannual payments. If these bonds currently sell for 115 percent of par value, what is the YTM

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Answers (1)

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Alexander Boyer · Answer 1

YTM is 7.43%

Explanation:

The yield to maturity of a bond can be computed using the rate formula in excel, which is given below:

=rate (nper, pmt,-pv, fv)

the nper is the number of coupon interest the bond would pay before it is redeemed at maturity starting from, which is 15 years multiplied by 2=30

the pmt is the semiannual coupon payable by the bond, which is $1000*9.1%/2=$45.5

the pv is the price of the bond which is 115%*$1000=$1150

the fv is the face value of the bond at $1000

=rate (30,45.5,-1150,1000) = 3.715%

The rate of 3.715% is a semi annual rate

annual rate 7.43% (3.715%*2)