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The following yields and prices were reported in the financial press for option-free bonds. Assume the coupon rates and reported prices are accurate. Assume a
- The following yields and prices were reported in the financial press for option-free bonds. Assume the coupon rates and reported prices are accurate. Assume a par value of $100. Note there is no maturity date provided. For each bond, is there an error with either the current yield or yield-to-maturity or current yield? If one or both of the two yields is incorrect, specify which one(s) AND explain why. Note, because there is no maturity date, you may not be able to determine if a yield is correct, but you can determine if a yield is incorrect.
ISSUE | PRICE | COUPON | CURRENT YIELD | YIELD-TO-MATURITY | ERROR (YES of NO) | IF YES, THEN WHICH ONE(S) AND WHY |
A | 100 | 6.0% | 5.0% | 6.0% |
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B | 110 | 7.0% | 6.4% | 6.1% |
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C | 114 | 7.5% | 6.6% | 7.7% |
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D | 95 | 4.7% | 4.9% | 5.9% |
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E | 75 | 5.6% | 5.1% | 4.1% |
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