A government bond issued in France has a coupon rate of 5 percent, a face value of 100.00 euros, and matures in five years. The bond pays annual interest payments. Calculate the yield to maturity of the bond (in euros)if the price of the bond is 106.00 euros.

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) is the interest rate that makes the present value of the bond's cash flows equal to its current price. Given the bond's price of 106 euros, a coupon rate of 5%, and a face value of 100 euros, the YTM is approximately 3.66%.

A Government Bond Issued in France Has a Coupon Rate