Suppose a seven-year, $1,000 bond with a 7.7% coupon rate and semiannual coupons is trading with a yield to maturity of 6.57%. a. Is this bond currently trading at a discount, at par, or at a premium? Explain. b. If the yield to maturity of the bond rises to 7.46% (APR with semiannual compounding), what price will the bond trade for? a. Is this bond currently trading at a discount, at par, or at a premium? Explain. (Select the best choice below.) A. Because the yield to maturity is less than the coupon rate, the bond is trading at a premium. O B. Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium. OC. Because the yield to maturity is greater than the coupon rate, the bond is trading at par. O D. Because the yield to maturity is less than the coupon rate, the bond is trading at a discount. b. If the yield to maturity of the bond rises to 7.46% (APR with semiannual compounding), what price will the bond trade for? The new price of the bond is $ (Round to the nearest cent.)
Suppose a seven-year, $1,000 bond with a 7.7% coupon rate and semiannual coupons is trading with a yield to maturity of 6.57%. a. Is this bond currently trading at a discount, at par, or at a premium? Explain. b. If the yield to maturity of the bond rises to 7.46% (APR with semiannual compounding), what price will the bond trade for? a. Is this bond currently trading at a discount, at par, or at a premium? Explain. (Select the best choice below.) A. Because the yield to maturity is less than the coupon rate, the bond is trading at a premium. O B. Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium. OC. Because the yield to maturity is greater than the coupon rate, the bond is trading at par. O D. Because the yield to maturity is less than the coupon rate, the bond is trading at a discount. b. If the yield to maturity of the bond rises to 7.46% (APR with semiannual compounding), what price will the bond trade for? The new price of the bond is $ (Round to the nearest cent.)
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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Transcribed Image Text:Suppose a seven-year, $1,000 bond with a 7.7% coupon rate and semiannual coupons is trading with a yield to maturity of 6.57%.
a. Is this bond currently trading at a discount, at par, or at a premium? Explain.
b. If the yield to maturity of the bond rises to 7.46% (APR with semiannual compounding), what price will the bond trade for?
a. Is this bond currently trading at a discount, at par, or at a premium? Explain. (Select the best choice below.)
A. Because the yield to maturity is less than the coupon rate, the bond is trading at a premium.
O B.
Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium.
Because the yield to maturity is greater than the coupon rate, the bond is trading at par.
OC.
D.
Because the yield to maturity is less than the coupon rate, the bond is trading at a discount.
b. If the yield to maturity of the bond rises to 7.46% (APR with semiannual compounding), what price will the bond trade for?
The new price of the bond is $
(Round to the nearest cent.)
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