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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.

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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.

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