A 1000 par value bond with 8 years to maturity pays semiannu

A $1000 par value bond with 8 years to maturity pays semi-annual coupons at a rate of 12% APR, with next coupon paid 6-months from today. If the bond is currently priced at $1000, what is it\'s yield to maturity (stated as an APR)?

Solution

When bond are priced at par, bond yield/required rate of return will equal to the coupon rate. Bond prices are majorly affected by the coupon rates and interest rates. Here, both are equal so it will sell at par.

Hence, correct option is (A) 12%