Remember the last payment is the return of principal plus PMT. Use IRR(cash flow

Question

Remember the last payment is the return of principal plus PMT. Use IRR(cash flows).

IRR=> ?

The YTM is 2*IRR===> ?

EJ Corp bond carries a 9 percent coupon, paid semi-annually. The par value is $1,000, and the bond matures in 12 years. If the bond currently sells for $905.50 (PV), what is its yield to maturity? Enter PV as a negative number. Calculate equal 24 payments ($1,000*.09/2) and enter.

Remember the last payment is the return of principal plus PMT. Use IRR(cash flows).

Time Payment Periods Cash Flow Today 0 Pv>= ? 1 ? 2 ? 3 ? 4 ? 5 ? 6 ? 7 ? 8 ? 9 ? 10 ? 11 ? 12 ? 13 ? 14 ? 15 ? 16 ? 17 ? 18 ? 19 ? 20 ? 21 ? 22 ? 23 ? Add FV to PMT= 24 ?

IRR=> ?

The YTM is 2*IRR===> ?

Explanation / Answer

Solution..

Calculation for yield to maturity.

Formula = C + ( F- P / n ) / F + P / 2

= 90 + [( 1,000 - 905.50 ) / 12 ] / (1,000 + 905.50 ) / 2

= 184.5 / 952.75 = 19.36%

Time Payment Periods Cash Flow Today 0 -1000 1 45 2 45 3 45 4 45 5 45 6 45 7 45 8 45 9 45 10 45 11 45 12 45 13 45 14 45 15 45 16 45 17 45 18 45 19 45 20 45 21 45 22 45 23 45 Add FV to PMT= 24 1436.7 IRR 5.34% he YTM is 2*IRR 10.64%

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