Which of the following $1,000 face-value securities has the highest yield to maturity?
A)a 5 percent coupon bond with a price of $600
B)a 5 percent coupon bond with a price of $800
C)a 5 percent coupon bond with a price of $1,000
D)a 5 percent coupon bond with a price of $1,200

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) of a bond is inversely related to its current price, given the same face value and coupon rate. Among the options, the bond with the lowest price ($600) will have the highest YTM because it offers the same annual coupon payment as the others but at a lower purchase price, leading to a higher yield.

Which of the Following $1,000 Face-Value Securities Has the Highest