Question

A bond has an annual 8 percent coupon rate, a maturity of 10 years, a face value of $1000 and makes semi-annual payments. If the price is $934.96, what is the annual nominal yield to maturity?

Step 1

Please note that coupons are being paid semi annually. Hence, the period here is half year. All the parameters need to be expressed as per period i.e. per half year.

Step 2

We can calculate the yield to maturity (YTM) using the RATE function of excel.

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