Sopranos Spaghetti Factory issued 30-year bonds two years ago at a cou

QUESTION

Sopranos Spaghetti Factory issued 30-year bonds two years ago at a coupon rate of 7.5 percent. If these bonds currently sell for 84 percent of par value, what is the YTM?
Number of years to Maturity of the bond = 30 years Annual Coupon rate of the bond = 7.5% Par Value of the bond = $1,000 Current Bond Value = 84% of Par Value Current Bond Value = [$1,000 * 0.84] Current Bond Value = $840 Calculating Yield to Maturity (YTM) of the bond: Calculating Yield to Maturity of the bond (YTM): (Using Ms-Excel “Rate” Function): Number of years to

aturity (Nper) 28 Annual Coupon Payment [$1,000 * 7.5%] -75 Current Bond (or) Present Value of the bond (PV) 840 Par Value (or) Future Value of the bond (FV) -1000 Yield to Maturity of the Bond (YTM) 9.09% Yield to Maturity of the bond (YTM) = 9.09%

 

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