Stone Sour Corp. issued 15-year bonds 2 years ago at a coupon rate of 7.90 perce

Question

Stone Sour Corp. issued 15-year bonds 2 years ago at a coupon rate of 7.90 percent. The bonds make semiannual payments. If these bonds currently sell for 109 percent of par value, what is the YTM? (Round your answer to 2 decimal places. (e.g., 32.16))

Stone Sour Corp. issued 15-year bonds 2 years ago at a coupon rate of 7.90 percent. The bonds make semiannual payments. If these bonds currently sell for 109 percent of par value, what is the YTM? (Round your answer to 2 decimal places. (e.g., 32.16))

Explanation / Answer

Hi,

Please find the answer as follows:

Nper = 13*2 = 26 (indicates the remaining maturity period over which the payments will be made)

PMT = 1000*7.90%*1/2 = 39.5 (indicates the semi-annual interest payment)

PV = 1090 (indicates the current selling price)

FV = 1000 (indicates the face value of the bonds)

Rate (YTM) = ?

YTM = Rate(Nper,PMT,PV,FV)*2 = Rate(26,39.5,-1090,1000)*2 = 6.84%

Answer is 6.84%.

Thanks.

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