A Japanese company has a bond outstanding that sells for 97

A Japanese company has a bond outstanding that sells for 97 percent of its

Solution

Hi,

Please find the detailed answer as follows:

Nper = 18 (indicates the period)

PV = 100000*97% = 97000 (indicates the price)

FV = 100000 (indicates the face value)

Rate = ? (indicates the YTM)

PMT = 100000*1.3% = 1300 (indicates the amount of interest payment)

Cost of Debt (YTM) = Rate(Nper,PMT,PV,FV) = Rate(18,1300,-97000,100000) = 1.49%

Thanks.