Computation of bonds Current yield and yield to maturity
1. An 8% semi-annual coupon bond matures in 5 years. The bond has a face value of $1000 and a current yields of 8021%. What are the bond\'s price and YTM?
2. Bond X is noncallable, has 20 years to maturity, a 9% annual coupon, and a $1000 par value. Your required return on Bond X is 10%, and if you buy it you plan to hold it for 5years. You, and the market, have expectations that in 5years the yield to maturity on a 15-year bond with similar risk will be 8.5%.
How much should you be willing to pay for Bond X today?
(Hint: You will need to know how much the bond will be worth at the end of 5 years)