Question

Tutorials

value of a bond based on its yield to maturity.

Consider what you have learned about valuing

bonds.

Bond $1$: Coupon rate $=4\%,YTM=4\mathrm{.}75\%$

Bond $2$: Coupon rate $=4\%,$ YTM $=4\mathrm{.}15\%$

Bond $3$: Coupon rate $=4\%,YTM=3\mathrm{.}25\%$

Bond $4$: Coupon rate $=4\%,$ YTM ${?}^2=4\%$

Which of the bonds is selling at a premium?

a$.)$ Bond $3$

b$.)$ Bond $2$

c$.)$ Bond $4$

d$.)$ Bond $1$