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

Ashlyn Cowan

20 July, 19:56

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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Raina Campos · 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%