An AT&T bond has 10 years until maturity, a coupon rate of 8 percent, and sells for $1,100.

a. What is the current yield on the bond?
b. What is the yield to maturity?

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To find the current yield, you need to divide the annual interest payment (coupon payment) by the bond's current market price and then multiply the result by 100 to express it as a percentage.

a. To calculate the current yield:
1. Determine the annual interest payment: Since the bond has a face value of $1,000 and a coupon rate of 8 percent, the annual interest payment is $1,000 * 8% = $80.
2. Find the current yield: Divide the annual interest payment by the market price of the bond ($1,100) and multiply by 100 to get the percentage: $80 / $1,100 * 100 ≈ 7.27%.

Therefore, the current yield of the AT&T bond is approximately 7.27%.

b. The yield to maturity (YTM) is a more comprehensive measure of the expected return on a bond. It takes into account not only the coupon payments but also the price at which the bond is purchased relative to its face value.

Finding the yield to maturity requires trial and error or the use of financial calculators. However, I can provide you with the steps to estimate it using trial and error:

1. Estimate the yield to maturity: Begin with an educated guess for the yield to maturity. For this example, let's start with 7%.

2. Calculate the future value of annual coupon payments: Since the bond has a face value of $1,000 and a coupon rate of 8%, the annual coupon payment is $80. Using a financial calculator or Excel, calculate the future value of these coupon payments over the 10-year period at the estimated yield to maturity. For example, at 7%, the future value of the coupons is approximately $852.

3. Calculate the future value of the bond: Add the future value of the coupons ($852) to the future value of the bond's face value ($1,000). In this example, the future value of the bond is approximately $1,852.

4. Solve for the yield to maturity: Adjust the estimated yield to maturity up or down until the future value of the bond calculated in step 3 is close to the bond's market price ($1,100 in this case). By using different estimated yields and recalculating step 3, you can narrow down the yield-to-maturity estimate.

However, please note that this trial and error method provides an estimation, and for an accurate calculation, it is recommended to use financial calculators or software that can directly calculate yield to maturity based on the bond's characteristics, current market price, and remaining time until maturity.