Why is the current yield less than the yield to maturity

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Reference no: EM132062350

Question: You purchase a U.S. 6%, 20-year bond with a face value of $100 at the price of $80.

1) What is the duration of the bond?

2) What is the current yield on the bond?

3) What is the yield to maturity on the bond?

4) Why is the current yield less than the yield to maturity?

5) If you sell the bond after 8 years at a price of $90 what is your hold period yield?

6) What is your realized compound yield if you held the bond to maturity? Assume you are able to reinvest all the coupons at 4% per year?

Reference no: EM132062350

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