Both ques....only typing 7. Five years ago a bond was priced at a premium. Since then, the yield to maturity for the bond has not changed. Is the price for that bond higher or lower today than it was five years ago? 8. You are assigning a yield to maturity for a 12% coupon bond based on your expectations of future economic conditions. If economic conditions are bad, the bond should have a 15% yield to maturity; if economic conditions stay as they are, the bond should have a 13% yield to maturity; and if economic conditions are good, the bond should have a 9% yield to maturity. You think there is a 25% chance economic conditions will be bad, a 45% chance that they will stay as they are, and a 30% chance that they will be good. Based on this, do you price the bond at a discount, par or premium?
Both ques....only typing
7. Five years ago a bond was priced at a premium. Since then, the yield to maturity for the bond has not changed. Is the price for that bond higher or lower today than it was five years ago?
8. You are assigning a yield to maturity for a 12% coupon bond based on your expectations of future economic conditions. If economic conditions are bad, the bond should have a 15% yield to maturity; if economic conditions stay as they are, the bond should have a 13% yield to maturity; and if economic conditions are good, the bond should have a 9% yield to maturity. You think there is a 25% chance economic conditions will be bad, a 45% chance that they will stay as they are, and a 30% chance that they will be good. Based on this, do you
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