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Homework answers / question archive / A two year $100 bond has 2% coupons paid annually
A two year $100 bond has 2% coupons paid annually. If the spot rates (quoted as effective annual rates) are r1=0.03, r2=0.04 , find the yield to maturity.
The yield to maturity is:
a. 3.8%
b. 4.25%
c. 3.75%
d. 3.5%
e. 4.2%
f. 4%
Price of bond =( 2 / 1.03) + (2+100) / (1.04)2 = 94.3047337278+1.9417475728
Price of bond = $ 96.2464813006
please see the attached file for the complete solution.
