Paige and Frank purchased a $1,000,ten-year bond with a coupon rate of 7.5 percent.They paid $800 for the bond.What is this bond's yield to maturity?Paige and Frank purchased a $1,000,ten-year bond with a coupon rate of 7.5 percent.They paid $800 for the bond.What is this bond's yield to maturity?

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Quizplus · Accepted Answer

The yield to maturity (YTM) is calculated based on the bond's current price, coupon payments, and time to maturity. Since Paige and Frank paid $800 for a bond with a face value of $1,000 and a 7.5% coupon rate, the YTM is higher than the coupon rate. Calculating the YTM using the formula or a financial calculator gives approximately 10.6%.

Paige and Frank Purchased a $1,000,ten-Year Bond with a Coupon