The supervisor of the Treasury Department of Nitram Computers Ltd has welcomed your analysis of Bonds A to D, and has given you another fixed-income security portfolio to analyse. The following information relates to these securities.

• Bond E - These bonds pay annual coupons at a fixed coupon rate of 4.1% p.a., and have 2 years to maturity.
• Bond F - These bonds pay annual coupons at a fixed coupon rate of 5.2% p.a., and have 3 years to maturity.
• Bond G - These bonds pay semi-annual coupons, on the 15th day of March and September each year, at a fixed coupon rate of 4.6% p.a., and have 3 years to maturity.
• Bond H - These bonds pay quarterly coupons at a fixed coupon rate of 8.6% p.a., and have 5 years to maturity.
• Promissory Note J - These notes were issued 131 days ago. When they were first issued they were issued as 180-day notes.

All of these securities have a face value of $1000.

Shown below are the current spot rates for 1, 2 and 3-year zero-coupon bonds with the same risk as bonds issues by Nitram.

Year Spot Rate 1 2.9% 2 2.9% 3 3.8% What is the Yield to Maturity of Bond E if it is currently trading at a price of $1026.91? (Hint: This cannot be solved with a normal calculator. It can be solved with a financial calculator or a spreadsheet. If you don't have either you can use trial and error - test each of the following four answers until you find the correct one.) a. 2.5% b. 3.0% c. 2.6% d. 2.7%