Suppose a seven-year, $1,000 bond with an 8.4% coupon rate and semiannual coupons is trading with a yield to maturity of 6.65%. 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 7.05% (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. B. Because the yield to maturity is greater than the coupon rate, the bond is trading at par. C. Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium. O D. Because the yield to maturity is less than the coupon rate, the bond is trading at a discount.
Suppose a seven-year, $1,000 bond with an 8.4% coupon rate and semiannual coupons is trading with a yield to maturity of 6.65%. 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 7.05% (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. B. Because the yield to maturity is greater than the coupon rate, the bond is trading at par. C. Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium. O D. Because the yield to maturity is less than the coupon rate, the bond is trading at a discount.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Suppose a seven-year, $1,000 bond with an 8.4% coupon rate and semiannual coupons is trading with a yield to
maturity of 6.65%.
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 7.05% (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.)
O A. Because the yield to maturity is less than the coupon rate, the bond is trading at a premium.
B. Because the yield to maturity is greater than the coupon rate, the bond is trading at par.
OC. Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium.
D. Because the yield to maturity is less than the coupon rate, the bond is trading at a discount.
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