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Treasury notes and bonds. Use the information in the following​ table: Assume a $100,000 par value....

Treasury notes and bonds. Use the information in the following​ table: Assume a $100,000 par value. What is the yield to maturity of the August 2005 Treasury bond with semiannual payment? Compare the yield to maturity and the current yield. How do you explain this​ relationship?

Today is February​ 15, 2008

Type

Issue

Date

Price​ (per $100 par​ value)

Coupon

Rate

Maturity

Date

YTM

Current

Yield

Rating

Bond

Aug 2005

85.15

5.00​%

​8-15-2015

–

5.872​%

AAA

What is the yield to maturity of the August 2005 Treasury​ bond?   

_____% (Round to three decimal​ places.)

Compare the yield to maturity and the current yield. How do you explain this​ relationship? ​(Select the best​ response.)

A. There is no certain relationship between the yield to maturity and the current yield.

B.If a bond sells at a​ discount, the yield to maturity is greater than the current yield.

C. If a bond sells at a​ premium, the yield to maturity is greater than the current yield.

D. If a bond sells for its par​ value, the yield to maturity is greater than the current yield.

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