2nd pic is the hint

thanks!

#17 O Munich-style Beerhouse is going to finance a new brewery using a debt issue. The company needs to raise $12.00 million today. An investment bank has suggested issuing 8-year bonds, with a 7.00% APR annual coupon, and a face value of $16.00 million. What yield to maturity is the investment bank placing on Munich-style bonds if they offer with these terms? Submit Answer format: Percentage Round to: 2 decimal places (Example: 9.24%, % sign required. Will accept decimal format rounded to 4 decimal places (ex: 0.0924)) Hide Hint Hide Hint Munich-style Beerhouse is going to finance a new brewery using a debt issue. The company needs to raise $12 million today. An investment bank has suggested to issue 20-year bonds, with a 6% APR annual coupon, and a face value of $15 million. What yield to maturity is the investment bank placing on Munich-style bonds if they offer with these terms? SOLUTION: Yield to maturity is the discount rate that sets the PV of bond cash flows to the price right now. USING FINANCIAL CALCULATOR: N 1/Y PV 20 ? -12 PMT 0.90 CPT 1/Y8.04 % per year USING EXCEL: =RATE(20,0.9,-12,15,0)=8.04% Bond Price PV of Bond Cash Flows CPN x (1 - (4)^) + y where y Po= Coupon CPN=APR%x Face Value = 6.00 % x $15 million = $0.90 million per year 20 $0.90 0,0 x (1-(14) ) + y y YTM .0804 = 8.04% $12= FV 15 Face Value (1+y)N yield to maturity N = 20 years $15 (1+y) 20