Bond B has a current yield of 5% and a yield-to-maturity of 7%. Is the bond...
Bond B has a current yield of 5% and a yield-to-maturity of 7%. Is the bond selling at a premium or a discount to its par value of $1,000? Explain your reasoning
Homework Answers
When Current Yield is less than YTM then the bond is sold at
discount.
Current Yield is coupon dividend by price of bond . When YTM is
higher than coupon rate then it is higher than current yield as
coupon by the price (which is sum PV of coupons and PV of Par
Value)In case of discount rate coupon rate is less than current
yield is less than YTM.
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Bond B has a current yield of 5% and a
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