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"Culpepper Supply has a bond issue outstanding that pays a stated annual 7.5 percent coupon and matures in 14 years. The bonds have a par value of $1,000 and a market price of $942.90. Interest is paid semiannually. What is the stated annual yield to maturity? The correct answer will give you a value that is within $1 of the target value."

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Answer:

8.19%

Explanation:

In this question, we use the Rate formula which is shown in the spreadsheet.  

The NPER represents the time period.  

Given that,  

Present value = $942.90

Future value or Face value = $1,000  

PMT = 1,000 × 7.5% ÷ 2 = $37.50

NPER = 14 years × 2 = 28 years

The formula is shown below:  

= Rate(NPER,PMT,-PV,FV,type)  

The present value come in negative  

So, after solving this,  the answer would be 8.19%

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