question archive A bond having par value $1,000, a quarterly coupon bond paying 17% interest and having a maturity of 5 years with current market price of $897
A bond having par value $1,000, a quarterly coupon bond paying 17% interest and having a maturity of 5 years with current market price of $897
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A bond having par value $1,000, a quarterly coupon bond paying 17% interest and having a maturity of 5 years with current market price of $897.07? What is the yield-to-maturity of this bond?
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| K = Nx4 |
| Bond Price =∑ [(Quarterly Coupon)/(1 + YTM/4)^k] + Par value/(1 + YTM/4)^Nx4 |
| k=1 |
| K =5x4 |
| 897.07 =∑ [(17*1000/400)/(1 + YTM/400)^k] + 1000/(1 + YTM/400)^5x4 |
| k=1 |
| YTM% = 20.33 |
| Using Calculator: press buttons "2ND"+"FV" then assign |
| PV =-897.07 |
| PMT = Par value * coupon %/coupons per year=1000*17/(4*100) |
| N =5*4 |
| FV =1000 |
| CPT I/Y |
| Interest rate = I/Y*4 |
| Using Excel |
| =RATE(nper,pmt,pv,fv,type,guess)*no. of payments per year |
|
=RATE(4*5,-17*1000/(4*100),897.07,-1000,,)*4 |
