2.

a. (1) Setting up the problem in keeping with Eq. (2-15) and solving for r, the yield to maturity is found to be 12.36 percent. The yield is less than the coupon rate when the bond trades at a price premium above its face value. (2) The yield here is 15.72 percent. Yield is more than the coupon rate for a bond trading at a discount. (3) Whenever the market price equals the face value, yield equals the coupon rate, 14 percent in this case.