Question: Suppose the government bond described in Problem is held for three years and then the savings institution acquiring the bond decides to sell it at a price of $1,020. Can you figure out the average annual yield the savings institution will have earned for its three-year investment in the bond?
Problem: A government bond is currently selling for $900 and pays $75 per year in interest for nine years when it matures. If the redemption value of this bond is $1,000, what is its yield to maturity if purchased today for $900?