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ABC bonds have a par value of $1,000. The bonds pay $30 in interest every six months and will mature in 10 years. a) Calculate the price if the yield to maturity on the bonds is 5, 6, and 7 perce respectively. b) Explain the impact on price if the required rate of return decreases. c) Compute the coupon rate on the bonds. How does the relationship between the coupon ra and the vield to maturity in determining the bond's price to it par value?

ABC bonds have a par value of $1,000. The bonds pay $30 in interest every six months and will mature in 10 years. a) Calculate the price if the yield to maturity on the bonds is 5, 6, and 7 perce respectively. b) Explain the impact on price if the required rate of return decreases. c) Compute the coupon rate on the bonds. How does the relationship between the coupon ra and the vield to maturity in determining the bond's price to it par value?

Essentials Of Investments
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
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Question 4 ABC bonds have a par value of $1,000. The bonds pay $30 in interest every six months and will mature in 10 years. a) Calculate the price if the yield to maturity on the bonds is 5, 6, and 7 percent, respectively. b) Explain the impact on price if the required rate of return decreases. c) Compute the coupon rate on the bonds. How does the relationship between the coupon rate and the yield to maturity in determining the bond's price to it par value?
Transcribed Image Text:Question 4 ABC bonds have a par value of $1,000. The bonds pay $30 in interest every six months and will mature in 10 years. a) Calculate the price if the yield to maturity on the bonds is 5, 6, and 7 percent, respectively. b) Explain the impact on price if the required rate of return decreases. c) Compute the coupon rate on the bonds. How does the relationship between the coupon rate and the yield to maturity in determining the bond's price to it par value?
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