Answered

Welcome to Westonci.ca, your ultimate destination for finding answers to a wide range of questions from experts. Connect with a community of experts ready to help you find solutions to your questions quickly and accurately. Our platform provides a seamless experience for finding reliable answers from a network of experienced professionals.

A 30-year maturity bond with face value of $1,000 makes annual coupon payments and has a coupon rate of 8%. (Do not round intermediate calculations. Enter your answers as a percent rounded to 3 decimal places.)

Sagot :

Answer and Explanation:

a. The yield to maturity is

Given that

FV = $1000,

PV = -$900

PMT = 80  (8% of $1,000)

NPER = 30

The formula is

=RATE(NPER,PMT,-PV,FV,TYPE)

after applying the formula, the rate is 8.97%  

b. In the case when the bond is sold at par so this means that yield to maturity is equivalent to the coupon rate i.e. 8%

c. The yield to maturity is  

Given that

FV = $1000,

PV = -$1100

PMT = 80  (8% of $1,000)

NPER = 30

The formula is

=RATE(NPER,PMT,-PV,FV,TYPE)

after applying the formula, the rate is 7.18%  

We hope this was helpful. Please come back whenever you need more information or answers to your queries. Thank you for visiting. Our goal is to provide the most accurate answers for all your informational needs. Come back soon. Thank you for visiting Westonci.ca. Stay informed by coming back for more detailed answers.