Suppose the price of the bond in given problem falls from $90 to $85 over a year. Calculate the bond's rate of return over the year.
Problem
Suppose a bond has a face value of $100, annual coupon payments of $4, a maturity of 5 years, and a price of $90.
a. Write an equation that defines the yield to maturity on this bond.
b. If you have the right kind of calculator or software, calculate the yield to maturity.