Stein Co. issued 13-year bonds two years ago at a coupon rate of 10.3 percent. The bonds make semiannual payments. If these bonds currently sell for 95 percent of par value, what is the YTM?

Question

Mathematics

Lilia Castaneda

24 March, 03:57

Stein Co. issued 13-year bonds two years ago at a coupon rate of 10.3 percent. The bonds make semiannual payments. If these bonds currently sell for 95 percent of par value, what is the YTM?

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Answers (1)

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Pablo Galvan · Answer 1

Nper = 11*2 = 22 (indicates the period over which interest payments are made)

PMT = 1000*10.3%*1/2 = 51.5 (indicates sem-annual interest payments)

PV = 1000*95% = 950 (indicates the current selling price of the bonds)

FV = 1000 (indicates the face value of bonds)

Rate = ? (Indicates YTM)

YTM = Rate (Nper, PMT, PV, FV) * 2 = Rate (22,51.5,-950,1000) * 2 = 11.098% or 11.10%

Answer is 11.098% or 11.10%.