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    Calculating YTM for the Given Bond

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    Assume that a Ford bond has a maturity of 30 years. The bond has a face value of $1,000 and a coupon rate of 8% paid semi-annually. The present market price for the bond is $950. Assume your required rate of return on the bond is 9%, given your other opportunities and your appetite for risk. Calculate the return (yield-to-maturity) on the bond.

    © BrainMass Inc. brainmass.com December 24, 2021, 11:31 pm ad1c9bdddf
    https://brainmass.com/economics/inflation/calculating-ytm-given-bond-576723

    SOLUTION This solution is FREE courtesy of BrainMass!

    Face Value of bond=Maturity Value=FV= 1000
    Market price of bond=PV= -950 cash outflow
    Number of periods=NPER=30*2= 60 half years
    Coupon per period=PMT=1000*8%/2= 40 semi annually
    Type of payment=TYPE= 0 End of period payments

    We can use RATE function in MS Excel to get YTM
    YTM= 4.23% =RATE(E3,E4,E2,E1,E5)
    Annual YTM=2*YTM= 8.46%

    Annual YTM is less than required rate of return (9%). Its not advisable to invest in this bond.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    © BrainMass Inc. brainmass.com December 24, 2021, 11:31 pm ad1c9bdddf>
    https://brainmass.com/economics/inflation/calculating-ytm-given-bond-576723

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