Once upon a time, the treasurer of “Mighty Corporation” (MCO) decided to issue a bond (hereafter: The bond) The bond would have a 20-year life and promised that the holder of the bond would receive:
20 annual payments of $50,
Along with the 20th payment, MCO promised to return the principal of $1,000. In other words, the final payment at maturity would be ($1000+$50) = $1050.
Question #1:
A) On the day it is issued, what is the Coupon Yield?
B) On the day it is issued, what is the Yield-to-Maturity (YTM)?