jaymariepope4240 jaymariepope4240

22-11-2019
Business

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Is the yield to maturity on a bond the same thing as the required return? Is YTM the same thing as the coupon rate? Suppose today a 10 percent coupon bond sells at par. Two years from now, the required return on the same bond is 8 percent. What is the coupon rate on the bond? What is the YTM on the bond?

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andromache andromache

25-11-2019

Answer:

Explanation:

The yield to maturity on a bond is the same thing as the required return. The YTM and the coupon rate is a totally different thing. The coupon rate is the interest which is computed on the principal amount whereas yield to maturity is a rate which is held at the maturity and its rate is also generated in maturity date.

So, in the given case, the Coupon rate is 10% and the YTM is 8% as it reflects the maturity i.e two years from now

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