I HAVE THE ANSWER TO REQUIRMENT ONE CORRECT... HOWEVER I HAVE TRIED FOR 3 DAYS A

Question

I HAVE THE ANSWER TO REQUIRMENT ONE CORRECT... HOWEVER I HAVE TRIED FOR 3 DAYS AND CAN NOT FIGURE OUT REQ 2 AND 3

PK Software has 8 percent coupon bonds on the market with 23 years to maturity. The bonds make semiannual payments and currently sell for 109.25 percent of par.

Requirement 1: What is the current yield on PK's bonds? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Current yield 7.32 %

Requirement 2: What is the YTM? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Yield to maturity %

Requirement 3: What is the effective annual yield? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Effective annual yield %

Explanation / Answer

Requirement 2

  K =Nx2         
BOND PRICE= [(Semi-annual Coupon)/(1 + YTM/2)^k]     +   Par value/(1 + YTM/2)^(Nx2)
                   k=1

                    K= 23x2          
109.25 = [(8*100/(100*2))/(1 + YTM/200)^k]     +   100/(1 + YTM/200)^23x2
                   k=1

YTM = 7.17%

Requirement 3

Effective annual rate = [(1 +stated rate/no. of compounding periods) ^no. of compounding periods - 1]* 100

= [ ( 1 + 8/200)^2 - 1]*100 = 8.16%

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