Consider two bonds, each with a $1,000 face value and each with three years remaining to maturity.

Question:

Consider two bonds, each with a $1,000 and each with three years remaining to maturity.
a. The first bond is a pure-discount bond that currently sells for $816.30. What is its yield-to-maturity?
b. The second bond currently sells for $949.37 and makes annual payments at a rate of 7% (that is, it pays $70 in interest each year). The first interest payment is due one year from today. What is this bond's yield-to-maturity?
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...