Consider a $1,000 non-callable bond with a 6% coupon, paid semi-annually, and 8 years to maturity. The bond is currently trading at $950. What is the bond's yield-to-maturity?

Question: Consider a $1,000 non-callable bond with a 6% coupon, paid semi-annually, and 8 years to maturity. The bond is currently trading at $950. What is the bond's yield-to-maturity?

Answer options: ✅ 6.84%

• 6.00%
• 5.37%
• 7.25%

Correct answer: 6.84%

Explanation: The yield-to-maturity (YTM) is the discount rate that equates the present value of the bond's future cash flows (coupon payments and face value) to its current market price. This requires an iterative calculation or financial calculator and is approximately 6.84% when solving for the internal rate of return.