Consider a coupon bond with a $1,000 face value and a coupon payment equal to 5 percent

Question:

Consider a coupon bond with a $1,000 face value and a coupon payment equal to 5 percent of the face value per year.

a. If there is one year to maturity, find the yield to maturity if the price of the bond is $990.

b. Explain why finding the yield to maturity is difficult if there are two years to maturity and you do not have a financial calculator.

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...