Problem
Yield to maturity
a) Compute the yield to maturity (YTM) of a zero-coupon bond with nine years to maturity and currently selling at 45% (i.e., 45% of the par value, which has a default value of $1,000).
b) Consider a bond issued at par (i.e., bond price=par/face value). The annual coupon rate is 8%. How would the YTM of this bond be?
c) Compute the YTM of a 5-year bond with annual coupon rate = 6.5% and currently selling at 103% of the par value (i.e., 103% of the par value, which has a default value of $1,000).