# Current Yield and Yield to Maturity of a bond

You hold a 10-year-maturity coupon bond that was issued 9 years ago with a coupon rate of 10%. If the interest rate on 1-year bonds is now at 5%, calculate the current yield and yield to maturity for your 10-year-maturity bond, and compare these with the coupon rate. If the interest rate on the 1-year bonds is now at 12%, calculate the current yield and yield to maturity for your 10-year-maturity coupon bond, and compare these with the coupon rate. What have you learned from these calculations?

© BrainMass Inc. brainmass.com October 1, 2020, 8:59 pm ad1c9bdddfhttps://brainmass.com/business/bond-valuation/160380

#### Solution Preview

You hold a 10-year-maturity coupon bond that was issued 9 years ago with a coupon rate of 10%. If the interest rate on 1-year bonds is now at 5%, calculate the current yield and yield to maturity for your 10-year-maturity bond, and compare these with the coupon rate. If the interest rate on the 1-year bonds is now at 12%, calculate the current yield and yield to maturity for your 10-year-maturity coupon bond, and compare these with ...

#### Solution Summary

Calculates Current Yield and Yield to Maturity of a bond and compares them.