Your bond is selling for $950 and has an annual coupon rate of 7%; it matures in five years, and its par value is $1,000.

What is the bond’s yield to maturity (YTM)?

The coupon payment is $70 (i.e., 7% of $1,000), so the equation is:

70∕(1 + i )1 + 70∕(1 + i )2 + 70∕(1 + i )3 + 70∕(1 + i )4 + 70∕(1 + i )5 +

1,000∕(1 + i )5 = $950 Using the formula or a bond yield calculator such as Money Chimp Bond Calculator, the interest rate or yield to maturity (i ) is 8.261%.

1. What is the YTM if your bond is selling for $950 but has a coupon rate of 6%?

2. What is the value of your $1,000 bond if the YTM is 5% and the bond has a coupon rate of 5% and matures in five years?