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Yield to maturity   The Salem Company bond currently sells for ​$802.27​, has a coupon interest rate...

Yield to maturity   The Salem Company bond currently sells for ​$802.27​, has a coupon interest rate of 12​% and a $ 1000 par​ value, pays interest annually​, and has 13 years to maturity.  

a. Calculate the yield to maturity ​(YTM​) on this bond. The yield to maturity on this bond is %. ​(Round to three decimal​ places.)

b. Explain the relationship that exists between the coupon interest rate and yield to maturity and the par value and market value of a bond. ​ (Select the best answer​ below.)

A. The market value of the bond approaches its par value as the time to maturity increases. The yield to maturity approaches the coupon interest rate as the time to maturity increases.

B. The market value of the bond approaches its par value as the time to maturity declines. The yield to maturity approaches the coupon interest rate as the time to maturity declines.

C. The market value of the bond approaches its par value as the time to maturity increases. The yield to maturity approaches the coupon interest rate as the time to maturity declines.

D. The market value of the bond approaches its par value as the time to maturity declines. The yield to maturity approaches the coupon interest rate as the time to maturity increases.

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Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago
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