The yield to maturity is the rate of return of a bond. In our example, we know that the par value is £1,000, the coupon rate is 6%, there are 5 years to maturity and the bond’s price is £950. We’re also going to assume that interest payments are semi-annual, in other words paid twice a year. Before we can calculate the yield to maturity, we will first calculate the regular coupon payment and the number of periods. We will then use Excel's RATE function to return the interest rate per period. Finally, we will create a calculation table to confirm that this answer is correct.
Calculate The Yield To Maturity Of A Bond With Annual Coupon Payments In Excel:
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[email protected]Overview: (0:00)
Intermediary Calculations: (0:39)
Calculate The YTM: (1:21)
Proof: (2:43)