Suppose a new AAA credit rating coupon bond with 10% coupon rate is issued at its face value of $1500, and at the secondary market, the bond attracts a lot more people than expected buying the bond. Given the fact that interest rate on short term bank deposits is 5%, and that the government insures any losses on deposits less than $100,000, what is the range of Yield to Maturity likely to be? Explain.

Answer rating: 100% (QA)

The yield to maturity of the bond is likely to be between 5 and 10 The reaso... View the full answer