Answer: 6.41%

## Explanation To calculate the yield-to-maturity (YTM) for this bond: - **Bond details**: - Current price: $975.00 - Par value: $1,000 (assumed) - Annual coupon: 6.0% = $60 per year - Maturity: 8 years - **YTM calculation**: The YTM is the discount rate that makes the present value of future cash flows equal to the current bond price: $975 = \frac{60}{(1+YTM)^1} + \frac{60}{(1+YTM)^2} + \cdots + \frac{60}{(1+YTM)^8} + \frac{1000}{(1+YTM)^8}$ - **Analysis**: Since the bond is selling at a discount ($975 < $1,000), the YTM must be **greater than** the coupon rate of 6.0%. This eliminates option A (5.88%). Using trial and error or financial calculator: - At 6.41%: Present value ≈ $975 - At 6.89%: Present value would be lower than $975 - At 7.14%: Present value would be even lower - **Conclusion**: The correct YTM is **6.41%** (Option B), which makes the present value of cash flows equal to the current bond price of $975.

Author: LeetQuiz .