A bond has a coupon rate of 8.5%, a maturity date of 1 June 2027, a current value of £97.00 and coupon frequency is semi- annual.
(a) If today is 1 June 2017, calculate the nominal yield, the current yield and the yield to maturity of the bond.
(b) Using the YTM calculation in part a) calculate the current price for the bond and discuss your findings.
(c) Critically assess the important assumptions made when you calculate the yield to maturity.