1. A bond matures in 20 years and pays an 8 percent annual coupon. The bond has a face value of $1,000 and currently sells for $900. What is the bond’s current yield and yield to maturity? 2. The face value for Karen’s Limited bonds is $100,000 and has a 2 percent annual coupon. The 2 percent annual coupon bonds matures in 2022, and it is now 2012. Interest on these bonds is paid annually on December 31 of each year, and new annual coupon bonds with similar risk and maturity are currently yielding 12 percent. How much should Karen sell her bonds today?

1. A bond matures in 20 years and pays an 8 percent annual coupon. The bond has a face value of $1,000 and currently sells for $900. What is the bond’s current yield and yield to maturity? 2. The face value for Karen’s Limited bonds is $100,000 and has a 2 percent annual coupon. The 2 percent annual coupon bonds matures in 2022, and it is now 2012. Interest on these bonds is paid annually on December 31 of each year, and new annual coupon bonds with similar risk and maturity are currently yielding 12 percent. How much should Karen sell her bonds today?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 13P

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