Compute the present value of the bond when the interest, Ask an Expert

Economics

Suppose you are thinking of buying a $1000 face-value coupon bond with a coupon rate of 10%, a maturity of 3 years, and a price of $1079.

a. Is the yield to maturity going to be above or below 10%? Why?

b. Write down the equation that can be solved for the yield to maturity of this bond: that is, the equation that equates the present value of the bond payments to the price of the bond.

c. Compute the present value of the bond when the interest rate is 8%.

d. Must the yield to maturity be above or below 8%?

e. Calculate the present value of the bond when the interest rate is 5%.

f. Must the yield to maturity be above or below 5%?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M9274278

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