Question

Broke Benjamin Co. has a bond outstanding that makes semiannual payments with a coupon rate of 5.5 percent. The bond sells for $955.25 and matures in 19 years. The par value is $1,000. What is the YTM of the bond

Answer 1

Answer:

5.89%

Explanation:

The computation of the yield to maturity could be find out by determining by applying the RATE formula i.e. to be shown in the attachment

Provided that,  

Present value = $955.25

Future value or Face value = $1,000  

PMT = 1,000 × 5.5% ÷ 2 = $27.50

NPER = 19 years × 2 = 38 years

The formula is shown below:  

= Rate(NPER;PMT;-PV;FV;type)  

The present value come in negative  

So, after applying the above formula , the YTM is

= 2.9473%  × 2

= 5.89%