Math for finance course, chapter bond pricing and yields, exercise 5
Here we need to calculate YTM, given the following input:
An investor is considering purchasing a bond with a face value of $1,000, a coupon rate of 6%, and a current price of $950. The bond has 3 years to maturity and pays annual coupon payments.
I use in Excel the function RATE(3;60;-950;1000), and it gives me YTM 7.94%. But the system marks correct the answer 7.12%. Why?
An investor is considering purchasing a bond with a face value of $1,000, a coupon rate of 6%, and a current price of $950. The bond has 3 years to maturity and pays annual coupon payments.
I use in Excel the function RATE(3;60;-950;1000), and it gives me YTM 7.94%. But the system marks correct the answer 7.12%. Why?
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