Using bond supply and demand analysis, predict how each of the following events would affect the yield to maturity on bonds.
A. An increase in the default risk on bonds.
B. A decline in brokerage commissions on stocks.
C. A decrease in the expected rate of inflation
Bond Rates of Return
A. What is the yield to maturity on a $1,000 face value discount bond maturing in two years that sells for $800 today?
B. What is the annual rate of return on a bond with an annual coupon rate of 10 percent, a face value of $100,000, and its price rises from $80,000 to $90,000 over the year? Show and explain.
C. What is the current yield on a perpetuity that makes annual payments of $300 and has a current price of $2,500?