A four-year bond has an 6 percent coupon rate and a face value of $1,000 . If the bond's current price is $817.75 , calculate the yield to maturity of the bond (assuming annual interest payments). A) 8 percent B) 10 percent C) 12 percent D) 6 percent

A four-year bond has an 6 percent coupon rate and a face value of $1,000 . If the bond's current price is $817.75 , calculate the yield to maturity of the bond (assuming annual interest payments). A) 8 percent B) 10 percent C) 12 percent D) 6 percent

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

A four-year bond has an 6 percent coupon rate and a face value of

$1,000

. If the bond's current price is

$817.75

, calculate the yield to maturity of the bond (assuming annual interest payments).

A) 8 percent

B) 10 percent

C) 12 percent

D) 6 percent

Definition Definition Calculates the present value of a bond's expected future periodic coupon payments. Bond valuation determines the theoretical fair value of a particular bond and helps investors estimate what rate of return they could expect. The bond's theoretical fair value is computed by discounting the future cash flows or coupon payments by an applicable discount rate.

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