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Consider a 25 year coupon bond with a face value of $1,000 that pays $84 annual coupons(beginning one year from today). Suppose that you bought the bond at issue for $922.18. Answer the following questions.

a. What is the yield to maturity for the bond?

b. What is the total return on the bond?

a. What is the yield to maturity for the bond?

Solving for kd, the yield to maturity is _______%.(Round to two decimal places.)

b. What is the total return on the bond?You buy the bond described above and you invest each coupon in a bank that pays 8.4%interest. On the maturity date, how much money do you have(in total) from the bond? Using the bond price and that future value, what is your compound annual total average return on the investment over the 25 years?

Step1: Future Value of Bond Cash Flows The future value of coupons is $________. (Round to the nearest cent.)

The future value of bond's cash flows is $__________. (Round to the nearest cent.)

Step2: Compound Annual Total Average Return The compound annual total average return is _______%.(Round to two decimal places.)

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