Question

"Culpepper Supply has a bond issue outstanding that pays a stated annual 7.5 percent coupon and matures in 14 years. The bonds have a par value of $1,000 and a market price of $942.90. Interest is paid semiannually. What is the stated annual yield to maturity? The correct answer will give you a value that is within $1 of the target value."

Answer 1

8.19%

Step-by-step explanation:

In this question, we use the Rate formula which is shown in the spreadsheet.

The NPER represents the time period.

Given that,

Present value = $942.90

Future value or Face value = $1,000

PMT = 1,000 × 7.5% ÷ 2 = $37.50

NPER = 14 years × 2 = 28 years

The formula is shown below:

= Rate(NPER,PMT,-PV,FV,type)

The present value come in negative

So, after solving this, the answer would be 8.19%