5. Suppose the General Motors Corporation issued a bond with 10 years until maturity, a face value of $1000, and a coupon rate of 7% (with annual payments). The yield to maturity on this bond when it was issued was 6% (EAR). (a). What was the price of this bond when it was issued? (b). Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment?
5. Suppose the General Motors Corporation issued a bond with 10 years until maturity, a face value of $1000, and a coupon rate of 7% (with annual payments). The yield to maturity on this bond when it was issued was 6% (EAR). (a). What was the price of this bond when it was issued? (b). Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:For problems 1 - 4 below, assume zero-coupon yields on default-free securities are as
summarized in the following table:
Maturity (years)
Zero-coupon YTM,
1
4.00%
2
4.30%
3
4.50%
4.70%
4.80%
5
5. Suppose the General Motors Corporation issued a bond with 10 years until maturity, a face
value of $1000, and a coupon rate of 7% (with annual payments). The yield to maturity on this
bond when it was issued was 6% (EAR).
(a). What was the price of this bond when it was issued?
(b). Assuming the yield to maturity remains constant, what is the price of the bond
immediately before it makes its first coupon payment?
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