lie is contemplating buying a 10-year, $1,000 bond with a 7% coupon rate (coupons paid semiannually). The bond is trading at a price that implies a $906.92 bond value (i.e., per $1,000 of face). a. What is the bond's yield to maturity (YTM)? b. If the bond's YTM changes to 8%, what will the bond's value be (per $1,000 of face)?
lie is contemplating buying a 10-year, $1,000 bond with a 7% coupon rate (coupons paid semiannually). The bond is trading at a price that implies a $906.92 bond value (i.e., per $1,000 of face). a. What is the bond's yield to maturity (YTM)? b. If the bond's YTM changes to 8%, what will the bond's value be (per $1,000 of face)?
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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Question
ulie is contemplating buying a
10-year,
$1,000
bond with a
7%
coupon rate (coupons paid semiannually). The bond is trading at a price that implies a
$906.92
bond value (i.e., per
$1,000
of face).a. What is the bond's yield to maturity (YTM)?
b. If the bond's YTM changes to
8%,
what will the bond's value be (per $1,000 of face)?Question content area bottom
Part 1
a. The YTM is
enter your response here%.
(Round to two decimal places.)b. The value per $1,000 of face at the new YTM is
$enter your response here.
(Round to the nearest cent.)Expert Solution
Step 1: Define=price of bond
Price of bond is the present value of coupon payments plus present value of the par value of bond based on the yield of bond.
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