Skolits Corp. issued 15-year bonds 2 years ago at a coupon rate of 7.3 percent. The bonds make semiannual payments. If these bonds currently sell for 103 percent of par value, what is the YTM?

Question

Litzy Bradshaw

Business

13 March, 20:26

Skolits Corp. issued 15-year bonds 2 years ago at a coupon rate of 7.3 percent. The bonds make semiannual payments. If these bonds currently sell for 103 percent of par value, what is the YTM?

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Answers (1)

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Nyla Bonilla · Answer 1

6.94%

Explanation:

The yield to maturity can be computed using excel rate function found below:

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

nper is the coupons that bond has left to pay i. e 26 semiannual coupons in 13 years

pmt is the semiannual coupon amount i. e $1000*7.3%*6/12=36.5

pv is the current market price i. e 103%*$1000=$1030

fv is the face value of $1000

=rate (26,36.5,-1030,1000) = 3.47%

semiannual yield = 3.47%

annual yield = 3.47% * 2=6.94%