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Bond Yield to Maturity - Debt Financing

Tidewater Home Health Cae, Inc. has a bond issue outstanding with eight years remaining to maturity, a coupon rate of 10 percent with interest paid annually, and a par value of $1,000. The current market price of the bond is $1,251.22.
a. What is the bond's yield to maturity?
b. Now, assume that the bond has semiannual coupon payments. What is its yield to maturity in this situation?

Solution Preview

Please see attached Excel file.

Tidewater Home Health Cae, Inc. has a bond issue outstanding with eight years remaining to maturity, a coupon rate of 10 percent with interest paid annually, and a par value of $1,000. The current market price of the bond is $1,251.22.

a. What is the bond's yield to maturity?

Yield to maturity

Yield to maturity can be calculated using Excel worksheet function RATE

Data
No of years to maturity= 8
Coupon rate= 10.00%
Face (Par) value= $1,000
Frequency ...

Solution Summary

The solution calculates yield to maturity for a bond with annual and semi-annual coupon payments.

$2.19