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A government bond issued in Gemany has a coupon rate of 3%, a face value of 100.00 euros, and matures in six years. The bond

A government bond issued in Gemany has a coupon rate of 3%, a face value of 100.00 euros, and matures in six years. The bond pays annual interest payments. Calculate the yield to maturity of the bond (in euros) if the price of the bond is 106.00 euros.

What will be the price of the bond is the YTM that you calculated falls by 0.5%? Explain in relation to the theory of relation between market prices and the prices of bond.

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