A coupon bond that pays interest annually is selling at a par value of $1,000, matures in five years, and has a coupon rate of 9%.The yield to maturity on this bond is

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) of a bond is the internal rate of return (IRR) if the bond is held until maturity, assuming that all payments are made as scheduled. For a coupon bond selling at its par value, the YTM is equal to the coupon rate. Since the bond is selling at par ($1,000) and has a coupon rate of 9%, its YTM is also 9%.

A Coupon Bond That Pays Interest Annually Is Selling at a Par