Discover the answers to your questions at Westonci.ca, where experts share their knowledge and insights with you. Join our platform to connect with experts ready to provide precise answers to your questions in various areas. Connect with a community of professionals ready to provide precise solutions to your questions quickly and accurately.
Sagot :
Answer:
YTM is 7.54%.
Explanation:
The yield to maturity can be calculated using the following RATE function in Excel:
YTM = RATE(nper,pmt,-pv,fv) .............(1)
Where;
YTM = yield to maturity = ?
nper = number of periods = number of years to maturity = original maturity number of years - number of years between January 1, 2016 and January 1, 2018 = 20 - 2 = 18
pmt = annual coupon payment = face value * annual coupon rate = 1000 * 9% = 90 (Note: This is an inflow to the bondholder and it is therefore a positive figure).
pv = present value = current bond price = -1141.20 (Note: This is an outflow to the buyer of the bond and it is therefore a negative figure).
fv = face value of the bond = 1000 (Note: This is an inflow to the bondholder and it is therefore a positive figure).
Substituting the values into equation (1), we have:
YTM = RATE(18,90,-1141.20,1000) ............ (2)
Inputting =RATE(18,90,-1141.20,1000) into excel (Note: as done in the attached excel file), the YTM is obtained as 7.54%.
Therefore, YTM is 7.54%.
We hope our answers were helpful. Return anytime for more information and answers to any other questions you may have. We appreciate your time. Please revisit us for more reliable answers to any questions you may have. Discover more at Westonci.ca. Return for the latest expert answers and updates on various topics.