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26 June, 16:51

Kempton Enterprises has bonds outstanding with a $1,000 face value and 10 years left until maturity. They have an 10% annual coupon payment, and their current price is $1,175. The bonds may be called in 5 years at 109% of face value (Call price = $1,090). What is the yield to maturity? Round your answer to two decimal places.

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  1. 26 June, 18:54
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    YTM is 7.46%

    Explanation:

    Given:

    Face value of bond (FV) = $1,000

    Years to maturity (nper) = 10

    Coupon rate = 10%

    Coupon payment (pmt) = $100 (0.1*1,000)

    Price of bond (PV) = $1,175

    If the bonds are held till maturity, then yield to maturity is calculated using excel function = Rate (nper, pmt, PV, FV)

    Yield of bond if held till maturity is 7.46%
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