Need help with C Approximate yield to maturity   An investor must choose between two bonds:   Bond A pays $90 annual interest and has a market value of $815. It has 15 years to maturity. Bond B pays $81 annual interest and has a market value of $700. It has eight years to maturity.   Assume the par value of the bonds is $1,000.   a. Compute the current yield on both bonds. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.) Current Yield Bond A11.04% Bond B11.57%   c. A drawback of current yield is that it does not consider the total life of the bond. For example, the approximate yield to maturity on Bond A is 11.51 percent. What is the approximate yield to maturity on Bond B? The exact yield to maturity? (Use the approximation formula to compute the approximate yield to maturity and use the calculator method to compute the exact yield to maturity. Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)   Approximate yield to maturity% Exact yield to maturity14.73%

Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
Chapter11: Bond Pricing And Amortization (bonds)
Section: Chapter Questions
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Need help with C Approximate yield to maturity

 

An investor must choose between two bonds:

 

Bond A pays $90 annual interest and has a market value of $815. It has 15 years to maturity.

Bond B pays $81 annual interest and has a market value of $700. It has eight years to maturity.

 

Assume the par value of the bonds is $1,000.

 

a. Compute the current yield on both bonds. (Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)

Current Yield

Bond A11.04%

Bond B11.57%

 

c. A drawback of current yield is that it does not consider the total life of the bond. For example, the approximate yield to maturity on Bond A is 11.51 percent. What is the approximate yield to maturity on Bond B? The exact yield to maturity? (Use the approximation formula to compute the approximate yield to maturity and use the calculator method to compute the exact yield to maturity. Do not round intermediate calculations. Input your answers as a percent rounded to 2 decimal places.)

 

Approximate yield to maturity%

Exact yield to maturity14.73%

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