10. If a $1,000 face value bond is sold at $1,052.41 and has a coupon rate of 10

Question

10. If a $1,000 face value bond is sold at $1,052.41 and has a coupon rate of 10%, which one of the following rate is the most feasible yield to maturity of this bond?

12.54%

10.00%

11.24%

All of the above are feasible.

None of the above are feasible.

Not enough information to answer.

7. You are purchasing a bond that currently sold for $1,085.36. it has the time-to-maturity of 12 years and a coupon rate of 7%, paid semi-annually. The bond can be called for $1,040 in 3 years. What is the yield to maturity of this bond? Round to the nearest hundredth percent. Do not include a percent sign in your answer. (i.e. If your answer is 4.32%, then type 4.32 without a % sign)

Explanation / Answer

10)

Bond price and yield to maturity has inverse relationship. If yield is more than coupon rate, bond will trade at discount. If the yield is less than coupon rate, bond will trade at par.

Here, bond is trading at premium. Hence, yield to maturity should be less than the coupon rate.

Hence, correct option is “None of the above are feasible.”

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