Trevor Price bought 10-year bonds issued by Harvest Foods five years ago for $96

Question

Trevor Price bought 10-year bonds issued by Harvest Foods five years ago for $969.52. The bonds make semiannual coupon payments at a rate of 8.4 percent. If the current price of the bonds is $1,051.61, what is the yield that Trevor would earn by selling the bonds today?

Trevor Price bought 10-year bonds issued by Harvest Foods five years ago for $969.52. The bonds make semiannual coupon payments at a rate of 8.4 percent. If the current price of the bonds is $1,051.61, what is the yield that Trevor would earn by selling the bonds today?

Explanation / Answer

let yield = r%

1051.62 = 42*((1+r/2)^10 -1)/(r/2) + 969.52*(1+r/2)^10

r = -6.7%

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