A bond has a 1000 par value 10 years to maturity and a 7 ann

A bond has a $1,000 par value, 10 years to maturity, and a 7% annual coupon and sells for $985.

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 2 years. What will the price be 2 years from today? Do not round intermediate calculations. Round your answer to the nearest cent.

$

Solution

FV = 1000, PMT = 70, N = 10, PV = -985

use rate function in Excel

yield to maturity = 7.22%

now replace N with 2 and calculate FV

value of bond after 2 years = 987.23