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A $1,000 par value bond sells for $1,216. It matures in 20 years, has a 14 percent coupon, pays interest semiannually, and can be called in 5 years at a price of $1,100. The bond's yield to maturity is: (Round the answer to two decimal places.)

Respuesta :

Answer:

The bond's yield to maturity is 11.26%

Explanation:

The computation of the yield to maturity is shown below:

Given that

Present value = PV = $1,216

Future value = FV = $1,000

NPER = 20 × 2 = 40

PMT = 1,000 × 14% ÷ 2 = $70

The formula is shown below:

= RATE(NPER;PMT;-PV;FV;TYPE)

After applying the above formula

The bond yield to maturity is

= 5.63% × 2

= 11.26%

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