Question

A 3-year bond paying 4% annual coupons pays $1000 at maturity. Today the bond sells for $986.98. To the nearest one hundredth of one percent, the bond's yield is

Answer 1

A bond is a source of funds for an organization. The firm issue the bonds to investors and pay periodic coupon payments (monthly, semi annually, annually etc). The current price of bond is the present value of all the payments discounted at yield to maturity.

Answer 2

Answer:

4.05%

Step-by-step explanation:

Yield = (4%)(1000)/986.98

= 40/986.98

=0.04052 = 4.05%