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A bond (face value $10,000) that pays annual coupons has 27 coupons remaining. The next...

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Finance

A bond (face value $10,000) that pays annual coupons has 27 coupons remaining. The next coupon is due in one year. The coupon rate is 6%. The current yield is 7%. Investors expect that there will be a capital gain of 1.2% over the next year. a. What is the value of the bond? [4] b. What is the value expected to be in one year immediately before a coupon is paid? [2] c. Is the current yield expected to rise, fall, or stay the same in one year if the YTM stays the same? This is a qualitative question there are no calculations involved. Provide reasons for your answer. [3] d. Ignore part (a), (b) and (c) for this part. An important announcement occurs that has a dramatic impact on the price. The price now becomes exactly $10,000. What is the new YTM? Support your answer.

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