A company has 8 percent coupon bonds making semiannual payments with a YTM of 7 percent. These bonds currently sell for 104.83 percent of par value. How many years do these bonds have left until they mature? Coupon rate = 7.8% Par Value = 1000 Market Value = 108%* 1000 = 108 Number of Periods(n) = 2*(12-2) = 20 Coupon = Coupon rate * Par value /2 = 7.8% * 1000/2 = 39 YTM using rate function of Excel = 2 * RATE(20,39,-1080,-1000) = 6.68%

A company has 8 percent coupon bonds making semiannual payments with a YTM of 7 percent. These bonds currently sell for 104.83 percent of par value. How many years do these bonds have left until they mature? Coupon rate = 7.8% Par Value = 1000 Market Value = 108%* 1000 = 108 Number of Periods(n) = 2(12-2) = 20 Coupon = Coupon rate Par value /2 = 7.8% * 1000/2 = 39 YTM using rate function of Excel = 2 * RATE(20,39,-1080,-1000) = 6.68%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 7P: Bond Valuation with Semiannual Payments Renfro Rentals has issued bonds that have a 10% coupon rate,...

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Question

A company has 8 percent coupon bonds making semiannual payments with

a YTM of 7 percent. These bonds currently sell for 104.83 percent of par

value. How many years do these bonds have left until they mature?

Coupon rate = 7.8%

Par Value = 1000

Market Value = 108%* 1000 = 108

Number of Periods(n) = 2*(12-2) = 20

Coupon = Coupon rate * Par value /2 = 7.8% * 1000/2 = 39

YTM using rate function of Excel = 2 * RATE(20,39,-1080,-1000) = 6.68%

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