Chapter 6

Both bonds Bill and Ted are prices at par value, the YTM of the bonds value at par is equal to their coupon rate. Therefore, the YTM of the bonds will equal to their coupon rate. Let us first work out on Bond Bill. In the current scenario, the value of the Bill will be $ 1,000. If the interest rate decreases by 2%, the YTM will be 5%, the value of the Bill can be calculated as;