Yield to maturity Each of the bonds shown in the following table pays interest annually.

\begin{tabular}{lcccc}

Bond & Par value & Coupon interest rate & Years to maturity & Current value \\

\hline A & \( \$ 1,000 \) & \( 9 \% \) & 8 & \( \$ 820 \) \\

B & 1,000 & 12 & 16 & 1,000 \\

C & 500 & 12 & 12 & 560 \\

D & 1,000 & 15 & 10 & 1,120 \\

E & 1,000 & 5 & 3 & 900

\end{tabular}

a. Calculate the yield to maturity (YTM) for each bond.

b. What relationship exists between the coupon interest rate and yield to maturity and the par value and market value of a bond? Explain.

\begin{tabular}{lcccc}

Bond & Par value & Coupon interest rate & Years to maturity & Current value \\

\hline A & \( \$ 1,000 \) & \( 9 \% \) & 8 & \( \$ 820 \) \\

B & 1,000 & 12 & 16 & 1,000 \\

C & 500 & 12 & 12 & 560 \\

D & 1,000 & 15 & 10 & 1,120 \\

E & 1,000 & 5 & 3 & 900

\end{tabular}

a. Calculate the yield to maturity (YTM) for each bond.

b. What relationship exists between the coupon interest rate and yield to maturity and the par value and market value of a bond? Explain.

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LG 6: Yield to maturityLG 6; Intermediatea.b. The market value of the bond approaches its par value as the time to maturity declines. The yield-tomaturity approaches the coupon interest rate as the time to maturity declines. Case \mathrm{B} highlights the fact that if the current price equals the par value, the coupon interest rate equals the yield to maturity (regardless of the number of years to maturity). ...