Financial Markets

Multiple Choice

The (annual) yield to maturity i on a coupon bond with a purchase price of 600, a face value of 200, a 3 year coupon payment stream (60, 20, 100) and a 3 year maturity is calculated as follows: 

  • i equals the annual interest rate that, when used to calculate the present value of the income stream (60, 20, 100), results in a present value equal to 400. 
  • i equals the annual interest rate that, when used to calculate the present value of the income stream (60, 20, 100), results in a present value equal to 800. 
  • i equals the annual interest rate that, when used to calculate the present value of the income stream (60, 20, 100), results in a present value equal to 600. 
If i equals the annual interest rate, than the present value = purchase price. 

Diskussion