Consider the following information from September 15, 2016, for a coupon bond with a face value of

Question:

Consider the following information from September 15, 2016, for a coupon bond with a face value of $1,000 and a maturity date of
September 15, 2018:
Coupon rate: 5.0%
Price: $955.11
Yield to maturity: 7.5%
a. What was the bond’s current yield?
b. Why is the bond’s yield to maturity greater than its coupon rate?

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...