Yield to maturity

The

bond shown in the following table pays interest

annually.

(Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.)

Par value	Coupon interest rate	Years to maturity	Current value
$1 comma 0001,000	66%	2020	$1 comma 1201,120

a. Calculate the yield to 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? Explain.

a. The yield to maturity

(YTM)

for the bond is

nothing%.

(Round to two decimal places.)

b. What relationship exists between the coupon interest rate and yield to maturity and the par value and market value of a bond? Explain. (Select the best answer below.)

A.

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.

B.

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.

C.

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.

D.

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.