Asked by Kendra Grady on Jul 06, 2024
Verified
The bonds issued by B&H Enterprises bear a 7% coupon which is payable semi-annually. The bonds mature in 11 years and have a $1,000 face value. Currently, the bonds sell at par. What is the yield to maturity?
A) 5.65%
B) 6.25%
C) 6.87%
D) 7.00%
E) 7.35%
Yield To Maturity
The total return anticipated on a bond if it is held until its maturity date, considering all interest payments and the principal repayment.
Par
The face value of a bond or other security, at which it can be redeemed at maturity or the amount of money equal in value to a particular share or bond.
Coupon
The yearly payment of interest to those holding bonds, represented as a percentage of the bond's nominal value.
- Analyze and understand the yield to maturity (YTM) for a variety of bond classifications.
Verified Answer
JB
josef boccardJul 06, 2024
Final Answer :
D
Explanation :
Since the bonds sell at par (their face value), the yield to maturity is equal to the coupon rate, which is 7%.
Learning Objectives
- Analyze and understand the yield to maturity (YTM) for a variety of bond classifications.