The Timberlake-Jackson Wardrobe Co. has 7 percent coupon bonds on the market wit
ID: 2631394 • Letter: T
Question
The Timberlake-Jackson Wardrobe Co. has 7 percent coupon bonds on the market with nine years left to maturity. The bonds make annual payments. If the bond currently sells for $1,038.50, what is its YTM? The Timberlake-Jackson Wardrobe Co. has 7 percent coupon bonds on the market with nine years left to maturity. The bonds make annual payments. If the bond currently sells for $1,038.50, what is its YTM? The Timberlake-Jackson Wardrobe Co. has 7 percent coupon bonds on the market with nine years left to maturity. The bonds make annual payments. If the bond currently sells for $1,038.50, what is its YTM?Explanation / Answer
Hi,
Please find the detailed answer as follows:
The Timberlake-Jackson Wardrobe Co. has 7 percent coupon bonds on the market with nine years left to maturity. The bonds make annual payments. If the bond currently sells for $1,038.50, what is its YTM?
Nper = 9 (indicates the number of years)
PMT = 1000*7% = 70 (indicates the annual interest payment)
PV = 1038.50 (indicates the current value of bonds)
FV = 1000 (indicates the face value of bonds)
Rate = ? (indicates YTM)
YTM = Rate(Nper,PMT,PV,FV) = Rate(9,70,-1038.50,1000) = 6.42%
Answer is 6.42%.
Thanks.
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