Question

A corporate bond with a face value of $1,000 matures in 4 years and has a coupon rate of 6.25 percent. The current price of the bond is $932 and interest is paid semiannually. What is the yield to maturity?

Answer 1

Answer:

8.28%

Explanation:

We use the Rate formula shown in the spreadsheet for this question

The NPER specifies the time period.  

Given that,  

Present value = $932

Future value or Face value = $1,000  

PMT = 1,000 × 6.25% ÷ 2 = $31.25

NPER = 4 years × 2 = 8 years

The formula is shown below:  

= Rate(NPER;PMT;-PV;FV;type)  

The present value come in negative  

So, after solving this,  

the yield to maturity is 8.28%