Question to work:
Question 1: Bonds issued by West Motel Chain have a par value of $1000, are selling for #1,100, and have 20 years remaining to maturity. The annual interest payment is 13.5% ($135). Compute the approximate yield to maturity.
Use formula as follows:
Approximate yield to maturity (Y') =
Annual interest payment + (plus)
(Principal payment - Price of the bond) <<<---numerator]; divided by (another numerator) of number of years to maturity divided by (denominator) 06.(Price of the bond) + 0.4 (Principal payment)
Question 2: Combine a trail and error approach with interpolation to find a more exact answer for this part 2.
A calculator can be used, but all calculations and explanations can be presented in MS Word instead of MS Excel.