Answer:
8.42%
Explanation:
If Bond price is equal to face value, then it means that YTM of the bond is also equal to coupon rate;
If YTM = Coupon rate, Price = Face value
Since the coupon rate = 8.25%, YTM (APR)= 8.25%
Next, find the Effective YTM or effective annual return(EAR) ;
Effective YTM or EAR = [tex](1+\frac{APR}{m}) ^{m} -1[/tex]
m = number of compounding periods per year; 2 in this case
EAR = [tex](1+\frac{0.0825}{2}) ^{2} -1\\ \\ = 1.0842 - 1\\ \\ =0.0842[/tex] or 8.42%
Therefore, if coupons are paid annually, the coupon yield will be equivalent to the 8.42% YTM;
Effective YTM = Coupon rate = 8.42%
