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3-1 (2 points) A 3% coupon bond pays interest annually and matures in three...

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Finance

3-1 (2 points) A 3% coupon bond pays interest annually and matures in three years. Par $ 1,000
Par value is $1,000. Investors required return is 3% per year compounded annually. Maturity (years) 3
a. What is the bond's price? Coupon 3%
Rate y 3%
b. If the bond rises in price by 5%, what is its new yield to maturity?
(Note: You can solve for yield using Excel's "=RATE()" or "=IRR()" functions.)
5.0% = price increase
= new bond price = old price * (1+% increase in price)
= new yield to maturity (YTM)

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