Question

Broke Benjamin Co. has a bond outstanding that makes semiannual payments with a coupon rate of 6.4 percent. The bond sells for $1,066.57 and matures in 22 years. The par value is $1,000. What is the YTM of the bond?

Answer 1

5.86%

Step-by-step explanation:

In this question, we use the RATE formula i.e to be shown in the spreadsheet below:

Given that,

Present value = $1066.57

Future value or Face value = $1,000

PMT = 1,000 × 6.4% ÷ 2 = $32

NPER = 22 years × 2 = 44 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

= 2.93% × 2

= 5.86%