Problem 6-20 Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a face value of $1000, and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%. Assuming the yield to maturity remains constant, what is the price of the bond immediately after it makes its first coupon payment? Face value Yield to maturity Coupon rate Number of years Price immediately after first coupon $1,000.00 6% 7% 10
Problem 6-20 Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a face value of $1000, and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%. Assuming the yield to maturity remains constant, what is the price of the bond immediately after it makes its first coupon payment? Face value Yield to maturity Coupon rate Number of years Price immediately after first coupon $1,000.00 6% 7% 10
Chapter5: The Cost Of Money (interest Rates)
Section: Chapter Questions
Problem 20PROB
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Transcribed Image Text:Problem 6-20
Suppose that General Motors Acceptance Corporation issued a
bond with 10 years until maturity, a face value of $1000, and a
coupon rate of 7% (annual payments). The yield to maturity on
this bond when it was issued was 6%.
Assuming the yield to maturity remains constant, what is the
price of the bond immediately after it makes its first coupon
payment?
Face value
Yield to maturity
Coupon rate
Number of years
Price immediately after first coupon
$1,000.00
6%
7%
10
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