Clock and Cane Company. has 6.8 percent, semiannual coupon bonds on the market with twelve years left to maturity, face value of $1000. If the bond currently sells for $989.45, what is its YTM

YTM is 6.90%

Explanation:

The yield to maturity on the bond can be computed using the rate formula in excel.

=rate(nper,pmt,-pv,fv)

nper is the time to maturity of 20 years multiplied by 2 since the bond is paying interest on semi-annual basis

pmt is the semi-annual interest receivable by investor which 6.8%/2*$1000=$34

pv is the current market price of $989.45

fv is the face value of $1000

=rate(40,34,-989.45,1000)

rate=3.45%

The 3,45% is the semi-annual YTM, whereas the annual YTM 3.45% *2=6.90%

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