Now, suppose today a 1

Accounting Oct 22, 2020

Now, suppose today a 1.54 percent coupon bond sells at par. Two years from now, the required return on the same bond is 9.23 percent. What is the YTM on the bond two years from now? (round 2 decimal places)

Expert Solution

Coupon rate of bond is fixed over the tenure of the bond.

So, the coupon rate of bond after 2 years will be 1.54%.

YTM(Yield to maturity) is the required rate on bond which can change over the term of bond based on the market rate.

So, the YTM of bond two from now = Required Return on Bond = 9.23%

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