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Stilley Resources bonds have 20 years left to maturity. Interest is paid annually, and the bonds...

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Finance

Stilley Resources bonds have 20 years left to maturity. Interestis paid annually, and the bonds have a $1,000 par value and acoupon rate of 21.5 percent.
  
Compute If the price of the bond is $1,330, what is the yield tomaturity? (Do not round intermediate calculations. Inputyour answer as a percent rounded to 2 decimal places.)

Yield to maturity%

Answer & Explanation Solved by verified expert
4.1 Ratings (867 Votes)

Par/Face value 1000
Annual Coupon rate 0.215
Annual coupon 215
Present Value = Future value/ ((1+r)^t)
where r is the interest rate and t is the time period
price of the bond = sum of present values of future cash flows
Price of the bond 1330
Use excel to find r
r 0.1595
mt 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
future cash flow 215 215 215 215 215 215 215 215 215 215 215 215 215 215 215 215 215 215 215 1215
present value 185.4248 159.9179 137.9197 118.9475 102.5852 88.47365 76.30328 65.80705 56.75468 48.94755 42.21436 36.40738 31.39921 27.07995 23.35485 20.14218 17.37143 14.98183 12.92094 62.97399
sum of present values 1330
Yield to maturity 15.95%

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Transcribed Image Text

Stilley Resources bonds have 20 years left to maturity. Interestis paid annually, and the bonds have a $1,000 par value and acoupon rate of 21.5 percent.  Compute If the price of the bond is $1,330, what is the yield tomaturity? (Do not round intermediate calculations. Inputyour answer as a percent rounded to 2 decimal places.)Yield to maturity%

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