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# two-year maturity bond

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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

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#### Solution Summary

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

\$2.49