Question

An annual-pay, 4% coupon, 10-year bond has a yield to maturity of 5.2%. If the price of this bond is unchanged two years later, its yield to maturity at that time is:

Answer 1

Answer:

C) greater than 5.2%"

Explanation:

Options': "A) 52% B) less than 5.2% C) greater than 5.2%"

Coupon = 0.04*1000 = 40

FV = 2000

Ytm = 5.2

N = 10

Present value = PV(5.2%, 10, 40, 1000)

Present value = $908.23

Now, after 2 years, the price is same but as maturity period is 8 years so the YTM would be

YTM = Rate(8, 40, -908.23, 1000)

YTM = 0.0545

YTM = 5.45%

So, the YTM is greater than 5,2%