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Calculating the bond'd yield to maturity

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Tidewater Home Health Care, 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 Summary

Solution describes the steps to calculate YTM of a bond in the given cases.

Solution Preview

Please refer attached file for better clarity of functions in MS Excel.

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

Coupon amount=1000*10%=$100
Maturity amount=$1,000
Number of periods=8 years
Let us see the cash flows.

Year End Cash Flows
0 -1251.22 Price
1 100
2 100
3 100
4 ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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