# Yield To Maturity of the Bond

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Each of the bonds shown in the following table pays interest annually.

Bond A $1,000 Coupon interest rate 9% Years to maturity 8 Current Value $820

Bond B $1,000 Coupon interest rate 12% Years to maturity 16 Current Value $1,000

Bond C $500 Coupon interest rate 12% Years to maturity 12 Current Value $560

Bond D $1,000 Coupon interest rate 15% Years to maturity 10 Current Value $1,120

Bond E $1,000 Coupon interest rate 5% Years to maturity 3 Current Value $900

a. Calculate the yield to maturity (YTM) for each bond.

b. What relationship exists between the coupon interest rate and yield to maturity

and the par value and market value of a bond? Explain.

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##### Solution Summary

This solution shows step-by-step calculations to determine the yield to maturity for the bond and what relationship exists between the coupon interest rate and yield to maturity.

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Answer: Given that,

(i) Bond Value $820

Par value of Bond $1,000

Coupon Rate 9%

Time to maturity 8 years

Yield to maturity 12.71%

(ii) Bond Value $1,000

Par value of ...

###### Education

- MBA, Indian Institute of Finance
- Bsc, Madras University

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