Question

If a $1,000 face value bond is sold at $1,056.32 and has a coupon rate of 10%, which one of the following rates is the most feasible yield to maturity of this bond? 9.53% 10.00% 10.83% 12.35% Not enough information to solve

Answer 1

Given about a bond,

Face value = $1000

Current price = $1056.32

Coupon rate = 10%

As Years to maturity of the bond is not provided, we can not find the exact yield to maturity on this bond.

But from the given information, we can say that Yield to maturity is less than coupon rate since its current price is more than the face value of the bond and bond is selling at premium.

It implies that YTM of the bond is less than 10%

So from the given option, best feasible option is 9.53%

And hence option A is correct.