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1.. You own bonds with 7 years remaining to maturity. The bonds have a $10,000 par value, the coupon payment every year is $375, and the bonds have a yield to maturity of 4.9%. What is the current market price of these bonds?

2.. If the bond in Question 1 sold at par (price = face value), explain why the yield to maturity would be the same as the coupon rate.

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Beverley Smith
Beverley SmithLv2
28 Sep 2019

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1.

a, You own bonds with 7 years remaining to maturity. The bonds have a $10,000 par value, the coupon payment every year is $375, and the bonds have a yield to maturity of 4.9%. What is the current market price of these bonds?

b, If the bond in question a sold at par (price = face value), explain why the yield to maturity would be the same as the coupon rate.

c, What is the duration of a two-year bond that pays an annual coupon of 5%, returns the face value, and has a current yield to maturity of 4.5%. Use $1000 as the face value.

d, What is the duration of a two-year zero-coupon (principal-only) bond that is yielding 6% and $10,000 face value? Note: This bond does not have coupon payments but does return the face value.

Assume that Bond A and Bond B are identical in every way except for the coupon rate (i.e., both bonds have the same par value, maturity, and yield to maturity or required rate of return). Bond A has a 12% coupon rate and Bond B is a zero coupon bond. Both bonds have a yield to maturity of 8% per year. If interest rates increase so that the yield on both issues increases to 10%, what would happen to the price of the bonds?

the citrus cafés Bonds have 4 years remaining to maturity. interest is paid annually; the bonds have a $1,000 par value ; and the coupon rate is 8 percent. what is the yield to maturity at a current market price of $1033.87?

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