Problem 7-7 Bond Yields [LO2] Heginbotham Corp. issued 15-year bonds two years a
ID: 2771669 • Letter: P
Question
Problem 7-7 Bond Yields [LO2]
Heginbotham Corp. issued 15-year bonds two years ago at a coupon rate of 7.9 percent. The bonds make semiannual payments. If these bonds currently sell for 109 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 15-year bonds two years ago at a coupon rate of 7.9 percent. The bonds make semiannual payments. If these bonds currently sell for 109 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 left to maturity) = (15-2)*2 = 26
PV (indicates the price) = 109%*1000 = 1090
PMT (indicate the semi annual payment) = 1000*7.9%*1/2 = 39.50
FV (indicates the face value) = 1000
Rate (indicates YTM) = ?
YTM = rate( 26,39.50,-1090,1000)*2
YTM = 6.84%
Answer
YTM = 6.84%