157 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138 139 140 142 1.43 A Rady Forma Inst Draw Page Layout A G 111 Problem 2: We want to calculate the Internal Rate of Return (IRR), or the Yield to Maturity (YTM), of a bond. Its par value is $1,000, it 112 matures in four years, and it pays a coupon rate of 8%. Payments are made semi-armally (total of 8 pays) 113 114 Times New Roman 19-AA. BIU---A- Ege & Centr C D Loan Bond Score Acomalbility inumitigate ( Par Vale Maturity in Years Coupon Rate Number of Payments per year Cash Flows Yield to Maturity Type here to search Par Val Maturity in Years Coupon Rate Towerest Definition Da par Review View CR INT IRR Finance Concept: IRR-YTM-The rate of return earned on a bond if it is held to maturity The YTM is the interest rate for which the PV of the bond cash flows (compons and face value) equals the bood price. O W Numerical Solution: With unequal cash flows, the IRR or YTM can be found by trial-and-error, or by using a financial calculator or Excel Spreadsheet Solution: 1.000 H Notation Impos par t CR G O INT YIM Gener 1.000 8% Number of Payments per year Internal Rate of Retur Note: There are 8 payments over a four year period. Each payment is 1/2 the annual coupon. J 24 Conditional Format C Formatting K L M IntDelete Format N O 280 S&Find & P 90F Clear Q BOH Analy Data Ay di R 12:06 AM 6/23/2022 Share 91. 137 138 139 140 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 www 159 160 161 162 163 164 165 166 167 168 169 Xu A P B Times New Roman-10-AK . BIU- For Loan Bond Score ability inumtigate D Today End of Year 2> Type here to search Age Center E N Note: There are 8 payments over a four year period. Each payment is 1/2 the annual coupon. Payment Periods 0 1 2 3 4 5 7 F Purchase W G (M+INT) IRR Cash Flow -1000 15 15 15 15 15 15 15 1015 It is very easy to find the IRR of the cash flows by using the Excel Wicand function: Step 1: Step 2: H Alternatively: In cell G154 exter: IRR(G145 G153) Gener con including the purchase price (a negative aber) and the last payment (interest + return of principal). Click OK. 28 Place your cursor in cell G154 and open the function wizard. Go to financial, and click on IRR Place the cursor in the first empty box (values) and then drag down the cash flow Conditional Format Coll Formatting Table- Pyles Points (3 each) 0 M D IntDelete Format Auto- Car O Sort & Find & P 90F Clear Q Analy Deta R 12:06 AM 6/23/2022 115% 157 A B 173 Test Your Skills: 174 175 176 177 178 175 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 X Rady Times New Roman-10-AK ===> BIU. D E H EJ Corp bond carries a 9 percent coupon, paid semi-annually. The par value is $1,000, and the bond matures in 12 years. If the bond currently sells for $905.50 (PV), what is its yield to munity? Loan Bond Score 7. kosabiling broadw Age & Centr Enter PV as a negative number. Calculate equal 24 payments ($1,000" 09/2) and enter. Remember the last payment is the return of principal plus PMT. Use IRR(cash flows). Type here to search Today Payment Periods 1 2 3 4 5 6 7 8 9 10 11 12 13 15 17 18 Higment O G PV 24 Conditional Format Cal Formatting Table Style Styles K L M IntDelete Format Cel N O Sort & Find & Select ding P Q 90F Clear -4 Data R A S 12:07 AM 115% 157 197 198 199 200 201 202 203 204 205 206 207 208 209 210 211 213 214 215 216 217 218 219 220 221 222 224 225 226 227 228 229 y Copy- Form B y BIU---A. & Centr $ C Add FV to PMT- Loan Bond Score O D The YTM is 2"IRR-> Type here to search [ 15 16 17 18 19 20 21 24 F IRR->> O D G H Number J 24 Conditional Formats Call Formatting Table K L M IntDelete Fo N O S&F& Analy Data P 90F Clear Q A R 12:07 AM D 115