Bond A has a 7% annual coupon, while Bond B has a 9% annual coupon. Both bonds have the same maturity, a face value of $1,000, and an 8% yield to maturity. Which of the following statements is CORRECT? a) Bond A trades at a discount and Bond B trades at a discount too. b) If the yield to maturity for both bonds remains at 8%, Bond A's price one year from now will higher than it is today, but Bond B's price one year from now will be lower than it is today. c) Bond B trades at a discount, whereas Bond A trades at a premium. d) Bond A trades at a discount, whereas Bond B trades at a premium. e) Both bonds trade at par value. f) If the yield to maturity for both bonds immediately decreases to 6%, Bond A's bond will have a larger percentage increase in value. g) Bond A trades at a premium and Bond B trades at a premium too.

Bond A has a 7% annual coupon, while Bond B has a 9% annual coupon. Both bonds have the same maturity, a face value of $1,000, and an 8% yield to maturity. Which of the following statements is CORRECT? a) Bond A trades at a discount and Bond B trades at a discount too. b) If the yield to maturity for both bonds remains at 8%, Bond A's price one year from now will higher than it is today, but Bond B's price one year from now will be lower than it is today. c) Bond B trades at a discount, whereas Bond A trades at a premium. d) Bond A trades at a discount, whereas Bond B trades at a premium. e) Both bonds trade at par value. f) If the yield to maturity for both bonds immediately decreases to 6%, Bond A's bond will have a larger percentage increase in value. g) Bond A trades at a premium and Bond B trades at a premium too.

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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Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 9.3 percent, a YTM of 7.3 percent, and has 18 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 7.3 percent, a YTM of 9.3 percent, and also has 18 years to maturity. Assume the interest rates remain unchanged and both bonds have a par value of $1,000. a. What are the prices of these bonds today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What do you expect the prices of these bonds to be in one year? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What do you expect the prices of these bonds to be in three years? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) d. What do you expect the prices of these bonds to be in eight years? (Do not round intermediate calculations and round your answers to 2…
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A 14-year bond pays semi-annual coupons at j2 = 9% and has a yield rate of j2 = 7.1%. If the book value immediately after the 7th coupon payment is $1038.45, and the book value immediately after the 11th coupon payment is $1034.51, what is the bond's face value? Answer: $ NOTE: Assume the note is NOT redeemable at par.

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