Answer:
The yield to maturity of the bonds is 11%
Explanation:
Price at which the bonds is currently trading = 283.30$
Face Value = $1000
Coupon rate = 2%
Hence the coupon bond rate = $1000 ×2%
= [tex]1000\times \frac{2}{100}[/tex]
=$20
Years to maturity: 20 years
Formula used:
=[tex]\frac{(C+ (\frac{(F-P)}{n}))}{(\frac{(F+P)}{2})}[/tex]
Where C is the bond coupon rate
F is the face value
P is the price
N is the number of years
=[tex]\frac{(20 +(\frac{(1000-283.30)}{20})}{(\frac{(1000+283.30)}{2})}[/tex]
=11%
The yield to maturity of the bonds is 11%
