Kaufman Enterprises has bonds outstanding with a $1 000 face value and 10 years left until

QUESTION

Kaufman Enterprises has bonds outstanding with a $1,000 face value and 10 years left until maturity. They have an 10% annual coupon payment, and their current price is $1,175. The bonds may be called in 5 years at 109% of face value (Call price = $1,090).What is the yield to maturity?
Solution: Kaufman Enterprises The YTM of a bond is its IRR. Following equation may be used to calculate the Bonds YTM: PV = Coupon/(1+YTM)^1 + CPN/(1+YTM)^2 + .. + FV/1+YTM)n The above equation may be solved using

nterpolation. Else, the excel function “RATE” may be used: PV = -$1,175 FV = $1,000 Coupon = PMT = 10%*$1,000 = $100 NPER = 10 Hence, YTM = 7.46%

ANSWER:

CLICK REQUEST FOR  AN EXPERT SOLUTION