Question: What is the yield to maturity on a bond that has a price of $2,000 and pays $100 of interest annually, forever? Solution The

What is the yield to maturity on a bond that has a

What is the yield to maturity on a bond that has a price of $2,000 and pays $100 of interest annually, forever? Solution The yield to maturity is 5%. Thus where C= yearly payment = $100 P=price of perpetuity (consol) = $2,000 ic Po $100 $2,000 ic=0.05 = 5% Ic= You try it... What is the yield to maturity on a bond that has a price of $5,000 and pays $100 of interest annually forever? Yield to maturity=%. (Round to two decimal places.)

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