Question

A $10,000 8 percent coupon bond that sells for $10,000 has a yield to maturity of

A. 8 percent.
B. 10 percent.
C. 12 percent.
D. 14 percent.

Answer 1

The yield to maturity of the bond is 8 percent. The correct answer is A. 8 percent.

Step-by-step explanation:

To calculate the yield to maturity of a bond, you need to consider the bond's price, coupon rate, and face value. In this case, the bond sells for $10,000, has a coupon rate of 8%, and a face value of $10,000.

The yield to maturity is the rate of return the bondholder will earn if they hold the bond until maturity.

Using the formula, the yield to maturity can be calculated as follows:

Yield to maturity = (Total payments - Purchase price) / Purchase price

Plugging in the values, the yield to maturity is (($10,000 + $800) - $10,000) / $10,000 = 0.08 or 8%.

So the correct answer is A. 8 percent.