Yield to maturity and future price A bond has a $1,000 par value, 20 years to ma

Question

Yield to maturity and future price

A bond has a $1,000 par value, 20 years to maturity, and a 5% annual coupon and sells for $860.

Yield to maturity and future price A bond has a $1,000 par value, 20 years to maturity, and a 5% annual coupon and sells for $860. What is its yield to maturity (YTM)? Round your answer to two decimal places. % Assume that the yield to maturity remains constant for the next 4 years. What will the price be 4 years from today? Round your answer to the nearest cent. $ N=4 I=6.24 PV= FV=?? PMT=50

Explanation / Answer

1. YTM can be calculated in Excel as =RATE(20,-50,860,-1000). This is equal to 6.24%.

2. Price 4 years from now can be calculated in Excel as =PV(6.244969%,16,-50,-1000). This is equal to 876.27.

Hope this helped ! Let me know in case of any queries.

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