Understanding Bond Pricing Suppose your friend tells you that she recently purchased a 10-year $7,000.00 bond with a 5% coupon. A month later, she saw it quoted at 105:4, but she does not know what this means. You can tell by the way the bond is priced that she has a U.S. Treasury or agency, corporate or municipal bond; otherwise it would have been priced 105, 105 1/8, 105.125 . You explain that the market price of her bond is now 105.13;7,105;7,358.75;738,675, meaning it is now a premium or discount bond. Based on the market price of the bond you calculated, you can tell that market interest rates have gone up or down since the bond was issued. The current yield of the bond is now . answer choice are bolded and italic
Understanding
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
