What is the yield to maturity of this bond

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Reference no: EM131451186

Assume you have a 2-year, $1000 par, 5% coupon (semiannual) bond, currently priced at $900.

a. What is the yield to maturity of this bond?

b. Find the future value of a $900 investment for 2 years with the yield to maturity from part a, compounded semiannually.

c. Find the future value as of year 2 of each cash flow of the bond, reinvested at the YTM and compounded semiannually.

d. Compare your solutions from parts b and c. What does this prove?

Reference no: EM131451186

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