Question

Q3) West Corp. issued 25-year, $1000 face value bonds two years ago at a coupon rate of 5.3 percent. The bonds make semiannual (twice per year) payments. If these bonds currently sell for 105 percent of par value, what is the YTM

Answer 1

Answer:

4.93%

Explanation:

For computing the YTM we need to apply the Rate formula i.e to be shown in the attachment

Provided that,  

Present value = $1,000 × 105% = $1,050

Assuming figure - Future value or Face value = $1,000  

PMT = 1,000 × 5.3% ÷ 2 = $26.5

NPER = 25 years - 2 years = 23 years × 2 = 46 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 yield to maturity is 4.93%