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26 September, 15:08

Broke Benjamin Co. has a bond outstanding that makes semiannual payments with a coupon rate of 5.8 percent. The bond sells for $997.27 and matures in 16 years. The par value is $1,000. What is the YTM of the bond?

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  1. 26 September, 15:15
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    YTM of the bond is 5.82%

    Explanation:

    The yield to maturity can be calculated using the rate formula in excel, given as = rate (nper, pmt,-pv, fv)

    nper is the number of times during the bond life coupon interest would be paid, which is 16 years multiplied by 2=32

    pmt is the semi annual payment of the bond which is 5.8%*$1000/2=$29

    pv is the current price of the bond $997.27

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

    =rate (32,29,-997.27,1000)

    rate=2.91%

    that is semi-annual yield to maturity

    annual yield is 2.91%*2=5.82%
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