186k views
5 votes
The bonds issued by Manson amp; Son bear a coupon of 6 percent, payable semiannually. The bond matures in 15 years and has a $1,000 face value. Currently, the bond sells at par. What is the yield to maturity? Is this a premium or discount bond and why?

User Md Aslam
by
7.5k points

1 Answer

5 votes

Answer and Explanation:

The computation of the yield to maturity is as follows;

Given that

PMT = Coupon rate = $1,000 × 6% ÷ 2 = $30

Future value = $1,000

Present value = $1,000

NPER = 15 × 2 = 30 years

Since the bond sells at par so the present value would be equivalent to the future value

Also the coupon rate is equivalent to the yield to maturity i.e. 6%

So this is neither a premium nor a discount bond as the coupon rate is equivalent to the yield to maturity

User TacoEater
by
7.6k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.