Three years ago, the French Co. issued twenty-year bonds with a 9% coupon rate and semi-annual interest payments. Today these bonds are quoted at a price of 105.75. What is the yield-to-maturity?

Question

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The yield-to-maturity (YTM) of a bond is the internal rate of return (IRR) if the bond is held until maturity, considering all its payments (coupons and principal) at their present values. Given the bond's price is above par (105.75), the YTM must be lower than the coupon rate (9%). Among the options, 8.36% is the only rate lower than the coupon rate and reasonably close to it, considering the bond's price premium. Calculating the exact YTM requires financial calculations involving the bond's price, coupon payments, years to maturity, and face value, which typically results in a rate between the coupon rate and the current market rates for similar bonds.

Three Years Ago, the French Co