Yield to maturity The bond shown in the following table pays interest annually

Par value	Coupon interest rate	Years to maturity	Current value
$500	11%	18	$430

a)Calculate the yield maturity (YTM) for the bond

b)What relationship exists between the coupon interest rate and yield to maturity and the par value and market value of a bond? (choose one from 1-4)

1. The market value of the bond approaches its par value as the time to maturity increases. The yield to maturity approaches the coupon interest rate as the time to maturity increases.

2. The market value of the bond approaches its par value as the time to maturity increases. The yield to maturity approaches the coupon interest rate as the time to maturity declines.

3.The market value of the bond approaches its par value as the time to maturity declines. The yield to maturity approaches the coupon interest rate as the time to maturity increases.

4.The market value of the bond approaches its par value as the time to maturity declines.The yield to maturity approaches the coupon interest rate as the time to maturity declines.