Question

A coupon bond with a face value of $1200 that pays an annual coupon of $200 has a coupon rate equal to the nearest whole number) %. Round your response to What is the approximate (closest whole number) yield to maturity on a coupon bond that matures one year from today, has a par value of $990, pays an annual coupon of $70, and whose price today is $1009 50 OA. 6% B. 5% ОС. 7% OD, 4% OE, 8% If the yield to maturity on a bond exceeds its coupon rate, the price of the bond will be its face value

Answer 1

Given data A coupon bond with a face value of $ 1200 pays an annual coupons $ 200 has coupons. Coupon Rate = i/p = coupon interest/par value of bond where i = annualized interest p = par value of bond/Face value Coupon Rate = $ 200/$ 1200 = 16% Yield to Maturity given data Annual Copoun = $ 70 \r\n Par value (or) Face value = $ 990. Price today = $ 1009.50. Yield to Maturity {$ 70 + ($ 990 - $ 1009.50)}/$ 1009.50 {$ 70 - $ 19.5}/$ 1009.50 50.5/1009.5 YTM implies 5% If the yield to maturity on bond exceeds a coupon rate price of the bond will be less its face value Therefore option B is correct.