A bond with a face value of $4500 pays annual coupons at an interest rate of 6% per year. This bond will be redeemed at par value at the end of its 20-year life and the first interest payment is due one year from now.
a) How much should be paid now for this bond in order to receive a yield of 10% per year on the investment?
b) If the bond is purchased now for $4,600, what is the yield to maturity?
Please show all calculations and formulas used