If the price of a two-year semi-annual pay bond is par (say, $100), and the coupon on the bond is 6%, the yield-to-maturity expressed with semi-annual compounding is
A) 5.87%
B) 5.96%
C) 6.00%
D) 6.12%

Question

If the price of a two-year semi-annual pay bond is par (say, $100), and the coupon on the bond is 6%, the yield-to-maturity expressed with semi-annual compounding is 
A) 5.87%
B) 5.96%
C) 6.00%
D) 6.12%

Quizplus · Accepted Answer

When a bond is priced at par, its yield-to-maturity is equal to its coupon rate. Since the bond has a 6% annual coupon rate and pays semi-annually, the semi-annual yield-to-maturity is also 6%, matching the semi-annual coupon rate.

If the Price of a Two-Year Semi-Annual Pay Bond Is