Question: Bill paid $450 for a 3-year bond with coupon payments of $20 and a face value of $500.
a) What is the formula to compute the yield to Maturity of this bond purchase for Bill?
b) Would the yield to maturity be higher or lower if Bill had paid $470 for the bond instead of $450?
c) Assume Bill purchased the bond for $450. After one year, Bill collects his first coupon payment of $20, but then sells the bond for $440. What is Bill's rate of return?