Question

A two-year bond with par value $1,000 making annual coupon payments of $100 is priced at $1,000. a. What is the yield to maturity of the bond?

Answer 1

Answer: 10%

Step-by-step explanation:

When the price of a bond is at par, it means that the coupon rate and the Yield to Maturity are the same.

The Coupon rate is the interest rate that the Issuer of the bond pays the bond holders as a percentage of Par.

The Coupon payment here is $100 and the rate is;

= 100/1,000

= 10%

Coupon Rate = 10% = Yield to Maturity