Rolling Company bonds have a coupon rate of 7.40 percent, 19 years to maturity,

Question

Rolling Company bonds have a coupon rate of 7.40 percent, 19 years to maturity, and a current price of $1,256. What is the YTM? The current yield? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Rolling Company bonds have a coupon rate of 7.40 percent, 19 years to maturity, and a current price of $1,256. What is the YTM? The current yield? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Explanation / Answer

Pmt = $1000*7.4% = $74.

PV = $1256

Nper = 19

FV = 1000

Compute the YTM.

YTM = Rate(Nper,Pmt,PV,FV) = Rate(19,74,-1256,1000) = 5.24%.

Current yield = Annual Coupon payment/ present bond price = $74/$1256 = 5.892%.

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