Answer:
a. Price of Bond is $1,333.33
b. Less
Explanation:
a.
Current yield is the ratio of coupon payment to the market value of the bond. It is the rate of income received from bond at current market rate.
As given
Coupon Payment = $1,000 x 8% = $80
Current Yield formula is as follow
Current Yield = Coupon Payment / Market Value
6% = $80 / Market Value
Market Value = $80 / 6%
Market Value = $1,333.33
b.
As we know that
if Price > Face value then YTM < Coupon rate
if Price < Face value then YTM > Coupon rate
if Price = Face value then YTM = Coupon rate
According to given condition
$1,333.33 > $1,000 then YTM < 8%
The bond’s yield to maturity is less than 8%.
