Problem 7-7 Bond Yields [LO2] Heginbotham Corp. issued 10-year bonds two years a
ID: 2613639 • Letter: P
Question
Problem 7-7 Bond Yields [LO2]
Heginbotham Corp. issued 10-year bonds two years ago at a coupon rate of 7.8 percent. The bonds make semiannual payments. If these bonds currently sell for 108 percent of par value, what is the YTM? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Heginbotham Corp. issued 10-year bonds two years ago at a coupon rate of 7.8 percent. The bonds make semiannual payments. If these bonds currently sell for 108 percent of par value, what is the YTM? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Explanation / Answer
YTM = rate(nper,pmt,pv,fv)*2
Nper (indicates the semi annual period) = (10-2)*2 = 16
PV (indicates the price) = 108%*1000 = 1080
PMT (indicate the annual payment) = 1000*7.8%*1/2 = 39
FV (indicates the face value) = 1000
Rate (indicates YTM) = ?
YTM = rate(16,39,-1080,1000)*2
YTM = 6.50%