A2-year maturity bond with face value of $1,000 makes annual coupon payments of $102 and is selling at face value. what will be the rate of return on the bond if its yield to maturity at the end of the year is:

This question is incomplete. However I found the full question on the web that it is asking for rate of return if the yield to maturity at the end of the year is 6%. It is calculated as follows;

Explanation:

In one year, the time left to maturity is 1 year since this is a 2-year maturity bond.

Rate of return formula = (P1 + Coupon - P0) /P0

whereby P1 = Next year's price

P0 = current price

P1 = (102 + 1000) /1.06

P1 = 1039.62

P0 = 1000 ( this is given in the question)

Rate of return  = (1039.62 + 102 - 1000)/1000

= 141.62 / 1000

= 0.14162 or 14.16% as a percentage

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