A RECENT STUDY OF INFLATIONARY EXEPECTATION/TUTORIALOUTLET DOT COM A RECENT STUDY OF INFLATIONARY EXEPECTATION/TUTORI | Page 4

interest rate and is assumed to be constant to maturity, what happens
to the
bond value as time moves toward maturity? Explain in light of the
graph in
part b.
P6–22 Yield to maturity Each of the bonds shown in the following
table pays interest annually.
Bond
maturity Par value
Coupon interest rate
Current value
A
8 $1,000
B
16 1,000
12
1,000
C
12 500
12
560
D
10 1,000
15
1,120
E
3 1,000
5
Years to
9%
$ 820
900
a. Calculate the yield to maturity (YTM) for each bond.
b. What relationship exists between the coupon interest rate and yield
to maturity
and the par value and market value of a bond? Explain.