Consider a discount bond with a face value of 500 and a, Ask an Expert

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Consider a discount bond with a face value of $500 and a maturity date of January 1, 2019.

a. Suppose that on January 1, 2016, when the market's (nominal) yield to maturity is 6.0 percent per year, you buy the bond at price P1. What will P1 be?

b. Now suppose that on January 1, 2017 the market yield to maturity is 5.0 percent. What will the new price P2 be?

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