Question

A 2-year bond with par value $1,000 making annual coupon payments of $106 is priced at $1,000. a. What is the yield to maturity of the bond? (Round your answer to 1 decimal place.) b. What will be the realized compound yield to maturity if the 1-year interest rate next year turns out to be (i) 10%, (ii) 12%, (iii) 14%? (Round your answers to 2 decimal places.)

Answer 1

Step-by-step explanation:

Face value = 1000

market price = 1000

annual yield = 106

yield to maturity = (106/1000) x 100

= 10.6 % .