A coupon bond that pays interest annually is selling at a par value of $1,000, matures in five years, and has a coupon rate of 9%. The yield to maturity on this bond is

A) 8.0%.
B) 8.3%.
C) 9.0%.
D) 10.0%.
E) None of the options are correct.

Question

Ethan Calvelli · Accepted Answer

Final Answer : C, Explanation :  The yield to maturity (YTM) of a bond is the internal rate of return (IRR) if the bond is held until maturity, assuming that all coupon and principal payments are made as expected. In this case, since the bond is selling at par value and the coupon rate is 9%, the YTM is also 9%. This is because the bond's coupon rate, when it equals the YTM, results in the bond selling at its par value.

A coupon bond that pays interest annually is selling at a par value of $1,000, matures in five years, and has a coupon rate of 9%. The yield to maturity on this bond is

A) 8.0%.
B) 8.3%.
C) 9.0%.
D) 10.0%.
E) None of the options are correct.

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Learning Objectives

Related questions

A coupon bond that pays interest annually is selling at a par value of $1,000, matures in five years, and has a coupon rate of 9%. The yield to maturity on this bond isA) 8.0%.B) 8.3%.C) 9.0%.D) 10.0%.E) None of the options are correct.

Definitions

Learning Objectives

Learning Objectives

Related questions

A coupon bond that pays interest annually is selling at a par value of $1,000, matures in five years, and has a coupon rate of 9%. The yield to maturity on this bond is

A) 8.0%.
B) 8.3%.
C) 9.0%.
D) 10.0%.
E) None of the options are correct.