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    Bond Yield to Maturity - Debt Financing

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    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?

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    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