Home /
Expert Answers /
Economics /
2-suppose-you-buy-a-10-year-bond-for-9-750-the-face-value-of-the-bond-is-10-000-and-it-pays-a-4-pa701
(Solved): 2) Suppose you buy a 10-year bond for $9,750. The face value of the bond is $10,000 and it pays a 4 ...
2) Suppose you buy a 10-year bond for $9,750. The face value of the bond is $10,000 and it pays a 4% annual coupon. What is the annual coupon payment? What is the yield to maturity (YTM)? Using the equation/formula discussed in the relevant lecture, calculate YTM. Show all your work! If you pay $9,500 instead, what would be the YTM? Is it higher or lower? (4 points)
Expert Answer
Annual coupon payment = Coupon rate *Face value of bond= 4% * 10,000= 4/100 * 10,000= 0.04*10,000