Question: The price of a bond with 4% annual coupon and $100 face value in year t is $90.
a. Is the yield to maturity greater than, less than or equal to the annual coupon rate? In one sentence, explain how you determined this.
b. Calculate the current yield in period t, i c t
c. Suppose price of the bond rises to $100 in period t+1. Calculate the return in
d. Did the yield to maturity of the bond in part c increase or decrease? In one sentence, explain how you determined this.