Bond yield

If the current market value was the same as the redemption amount (in this case $100), then the return on debt (the yield) would be the same as the coupon rate (in this case 7%). This is always true (and you can check for yourself :-) ) The market value is the PV of the future receipts discounted at the required return, and as always with discounting the higher the interest rate the lower the PV (and vice versa). Here the MV is higher than the redemption amount and therefore the yield is lower than the coupon rate. I only usually start with 10% as my first 'guess' simply because it is in the middle of the tables. It doesn't matter which two guesses you use in the exam, just as when calculating the IRR for a project.

For both posts, the answer is yes. You should remember from Paper FM (was F9) and from Paper MA (was F2) that when the IRR is calculated using two guesses, then the answer is always only an approximation because the relationship is not linear.

You are welcome :-)