Final answer:
It is not possible to calculate the nominal yield to maturity (YTM) of the bond in the question without knowing the bond's current market price. The YTM calculation requires the use of the current market price to assess the interest rate that equates the present value of all future cash flows to the bond's price. Therefore, we cannot determine the YTM from the options given in the question.
Step-by-step explanation:
The student's question concerns calculating the nominal yield to maturity (YTM) of a bond with given characteristics such as coupon rate, current yield, face value, and payment frequency. However, the provided information is insufficient to calculate YTM accurately, as we would need to know the bond's current market price. Since we don't have that, we cannot directly calculate YTM.
The current yield is given as 8.5%, which is calculated as the annual coupon payment divided by the current market price of the bond. Without the market price, we cannot move forward to find YTM. Moreover, the information provided in the reference does not directly relate to the calculation of YTM but gives a general understanding of bond yield and price relationship when interest rates change.
Generally, YTM calculation involves solving for the rate at which the present value of all future cash flows (coupon payments and the face value at maturity) equals the current market price of the bond. This is typically done using a financial calculator or an iterative numerical method since the equation is not straightforward to solve algebraically for the YTM.
Given the lack of market price in the student's question, we cannot provide a direct answer to the YTM among the choices provided. The answer options given appear to be irrelevant without the right data.