Question

1) A 2-year maturity bond with face value of $1000 makes annual coupon payments of $80. At a yield to maturity of 8 percent, the bond must be selling for

2) A 2-year maturity bond with face value of $1000 makes annual coupon payments of 8 percent per annum and is currently selling at par. What return will you earn on the bond if you buy it today and sell it at the end of the year when the yield to maturity is 8 percent?

Answer #1

Explanation: In both the cases, since the interest rate and yield to maturity is same i.e., current price will always be same as par value.

Note: In case of any clarification, please do comment. Thank you.

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