The 6.3 percent, semi-annual coupon bonds of pe engineers mature in 13 years and have a price quote of 99.2. these bonds have a current yield of percent, a yield to maturity of percent, and an effective annual yield of percent
a) 6.23; 6.36; 6.42
b) 6.23; 6.20; 6.16
c) 6.12; 6.36; 6.42
d) 6.35; 6.39; 6.49
e) 6.35; 6.32; 6.29

Hi, the answer is D) current yield=6.35% ; YTM=6.39% ; Effective annual rate=6.49%

Explanation:

In order to decide, we need to use 3 formulas with the information given, let´s start to solve this.

Current yield

Now, our bond is its face value times the coupon, (for all bonds, its face value is 100)

Therefore, 100x6.3% = 6.3

Yield to Maturity (YTM)

We should only follow this formula.

Where:

C = Coupon (6.3)

F= Face Value (remember, 100)

P= Price (99.2)

n= years to maturity

Therefore

Finally, we have to find the effective annual rate, for that, we have to use the YTM as our nominal rate, since it is semi-annual, the number of compounding periods is 2 (two semesters in a year).

The formula goes as follows.

Therefore.

Best of luck.

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