The Malin Corporation issued a $1,000 face value, 15 year, zero coupon bond in M

Question

The Malin Corporation issued a $1,000 face value, 15 year, zero coupon bond in March 2015. The initial price of the bond was $118. Assume semi-annual periods. Answer the following two questions: 1. What is yield to maturity on this bond? 2. What is the amount of implicit interest that must be declared in year 2?

YTM = 10.88% ; INT = $20.84

YTM = 11.24% ; INT = $31.18

YTM = 14.77% ; INT = $32.52

YTM = 10.88% ; INT = $31.18

YTM = 11.24% ; INT = $22.84

YTM = 14.77% ; INT = $20.84

YTM = 10.88% ; INT = $20.84

YTM = 11.24% ; INT = $31.18

YTM = 14.77% ; INT = $32.52

YTM = 10.88% ; INT = $31.18

YTM = 11.24% ; INT = $22.84

YTM = 14.77% ; INT = $20.84

Explanation / Answer

FV 1000 PV 118 NPER 30 (15 x 2) Rate 14.77% =RATE(30,,-118,1000)*2 value after 1 year = 118 x (1+ .07385)^2 $                               136.07 *14.77/2 = 7.385 Value after 2 year = 118 x (1 + .07385)^4 $                               156.91 Difference (156.91-136.07) 20.84 Ans is F YTM = 14.77% ; INT = $20.84

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