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

Business

Selena Holmes

2 January, 08:06

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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Ayla Bowers · 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%