The appropriate discount rate for cash flows received one year from today is 11 percent. The appropriate

Question:

The appropriate discount rate for cash flows received one year from today is 11 percent. The appropriate annual discount rate for cash flows received two years from today is 14 percent.

a. What is the price of a two-year bond that pays an annual coupon of 6 percent?

b. What is the YTM of this bond?

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... Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...