Explain what is meant by a bond yield to maturity

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Lifestyle Ltd has issued A rated corporate bonds with 10 years to maturity and a coupon rate of 8%. The bonds have a par value of $1000 and interest on these bonds is paid semi-annually.

Required:

Problem 1: If you require a return of 10% on this bond, what is the value of this bond to you?

Problem 2: Is it true that the only risk associated with owning a bond is that the issuer will not make all the payments? Explain.

Problem 3: What is the relationship between the required rate of return and the coupon interest rate that will cause a bond to sell at a discount? At a premium?

Problem 4: Explain what is meant by a bond's Yield to Maturity (YTM).

Problem 5: What is the approximate yield to maturity for a $1000 par value Treasury issued bond selling for $1050, paying interest annually, and having 6 years to maturity? Assume a coupon rate of 8%.

Reference no: EM132993491

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