NEED HELP ON FINANCE PROBLEMS-CALCULATOR PROBLEMS?
1. What is the yield to maturity on a $1000 par value 8.875% McDonald’s Corporation bond if the investor buys the bonds at the following market price of $1,175? Assume the coupon is paid annually and the bond matures in 15 years?
2. McDonald’s Corp’s $1,000 par value zero-coupon notes mature in six years. What is the yield to maturity to an investor buying one of these notes for $250??
*** I’m having troubling calculating these on a finance calculator. I have the BA-II Calculator. I think im not understanding the process of calculating these, so i can’t get the right answer. I know the yield to maturity is the rate of return and theres this formula in my book that has “Required rate of return on preferred stock = preferred annual dividend per share/Value of a share of preferred share”
If you can help that would be great cuz i can’t get the answer <_< aftet trying a million times
With BA II Calculator
Problem 1
Enter
N 15
I = ?
PV -1175
PMT 88.75
FV 1000
In MS Excel
=RATE(15,88.75,-1175,1000)
0.06958613635614
6.96%
I use FinFreedom v1.0 and it produces YTM of 6.95 %
Problem 2
FinFreedom v1.0 tells me YTM on non zero coupon bond with $1000 par value that matures in six years having a Market value of $250 is 26%
In MS Excel
=rate(6,0,-250,1000)
0.25992104989484
26%
BA II Calculator
Enter
N 6
I = ?
PV -250
PMT 0
FV 1000
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