Stein Co. issued 13-year bonds two years ago at a coupon rate of 10.3 percent. The bonds make semiannual payments. If these bonds currently sell for 95 percent of par value, what is the YTM?

Question

Cutie

Mathematics

16 December, 10:37

Stein Co. issued 13-year bonds two years ago at a coupon rate of 10.3 percent. The bonds make semiannual payments. If these bonds currently sell for 95 percent of par value, what is the YTM?

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Obie · Answer 1

Nper = 11*2 = 22 (indicates the period over which interest payments are made)

PMT = 1000*10.3%*1/2 = 51.5 (indicates sem-annual interest payments)

PV = 1000*95% = 950 (indicates the current selling price of the bonds)

FV = 1000 (indicates the face value of bonds)

Rate = ? (Indicates YTM)

YTM = Rate (Nper, PMT, PV, FV) * 2 = Rate (22,51.5,-950,1000) * 2 = 11.098% or 11.10%

Answer is 11.098% or 11.10%.