A3-18

"You are currently holding a corporate bond. It has a remaining life of exactly 25 years till maturity. It has a coupon rate of 4.5% (nominal rate compounded semi-annually) and a face value of $1,000.Currently, the market is demanding a nominal rate of 6% compounded semi-annually on bonds with similar risk and maturity date.

A) If you are thinking of selling the bond today, what is the current value of the bond?

B) If you paid $900 for the bond today, what would be your "Yield to Maturity" YTM on this investment?

C) Based on the same $900 purchase price today, what is the bonds, "Current Yield"?"