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Answer: above 5%. A bond priced below par yields more than its coupon.

Quick approximation:
(coupon + annualized discount) / average of price and par
= (5 + 2/5) / 99
= 5.40 / 99, about 5.45%

Exact YTM is about 5.47%. Current yield (5/98, about 5.10%) ignores the pull to par.

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A 5-year bond pays a 5% annual coupon and is priced at 98.

Is its yield above or below 5%? Roughly what is it?

Reply with your answer. No calculator.

Answer in the replies later today.

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