# two-year maturity bond

A two-year maturity bond with a face value of $1,000 makes annual coupon payments of $80 and is selling at face value. What will be the rate of return on the bond if its yield to maturity at the end of the year is (a) 6%,

(b) 8%, (c) 10%.

Solution

Problem 4-22

Instructions

Use the assumptions below and the bond values to calculate the rate of return.

Bond face value $1,000

Annual coupon payment $80

A two-year maturity bond with a face value of $1,000 makes annual coupon payments of $80 and is selling at

face value. What will be the rate of return on the bond if its yield to maturity at the end of the year is (a) 6%,

(b) 8%, (c) 10%.

Rate of

Yield to Maturity Value Return

6% $1,018.87 FORMULA

8% $1,000.00 FORMULA

10% $981.82 FORMULA

https://brainmass.com/business/bond-valuation/114060

#### Solution Summary

The solution calculates the rate of return on a bond if the yield to maturity ends at the year.