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Trevor Price bought 10-year bonds issued by Harvest Foods five years ago for $914.46. The
bonds make semiannual coupon payments at a rate of 8.4 percent. If the current price of the
bonds is $1,001.17, what is the yield that Trevor would earn by selling the bonds today?
Solution
Coupon (PMT)= 1000*8.4%*1/2 = $ 42
Fv = 1072.36
PV = $ 981.08
nper = 5*2 = 10
Half Yearly Interest Rate = rate(nper,pmt,pv,fv)
Half Yearly Interest Rate = rate(10,42,-981.08,1072.36)
Half Yearly Interest Rate = 5.02%
Yield that Trevor would earn by selling the bonds today =(1+ 5.02/100)^(2) -1 = 10.29%

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Trevor Price bought 10-year bonds issued by Harvest Foods five years.pdf

  • 1. Trevor Price bought 10-year bonds issued by Harvest Foods five years ago for $914.46. The bonds make semiannual coupon payments at a rate of 8.4 percent. If the current price of the bonds is $1,001.17, what is the yield that Trevor would earn by selling the bonds today? Solution Coupon (PMT)= 1000*8.4%*1/2 = $ 42 Fv = 1072.36 PV = $ 981.08 nper = 5*2 = 10 Half Yearly Interest Rate = rate(nper,pmt,pv,fv) Half Yearly Interest Rate = rate(10,42,-981.08,1072.36) Half Yearly Interest Rate = 5.02% Yield that Trevor would earn by selling the bonds today =(1+ 5.02/100)^(2) -1 = 10.29%