A 1000 par value bond is for sale its coupon rate is 350, Ask an Expert

Finance

A $1,000 par value bond is for sale. Its coupon rate is 3.50% and it will be outstanding for 4 years.

Current rates (discount rate or opportunity cost of money) are only 2.20%.

- Question 1: Without doing any math, do you think the price (value) of this bond is going to be higher or lower than $1,000 ?

- Question 2: Now, do the math. What is the market price of this bond, given the above facts?

- Question 3: Would you predict the current yield on this bond to be higher or lower than the coupon rate?

- Question 4: What is the current yield on this bond ?

- Question 5: Would you expect the Yield to Maturity of this bond to be higher or lower than its coupon rate?

- Question 6: Would you expect the Yield to Maturity of this bond to be higher or lower than its current yield?

- Question 7: Calculate the Yield to Maturity of this bond.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91789542

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