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A semi-annual corporate bond has a coupon rate of 9 percent per year. The face value...

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Finance

A semi-annual corporate bond has a coupon rate of 9percent per year. The face value is $1,000. The market interestrate (yield to maturity) for this bond today is 10.5 percent. Thisbond has 25 years before maturity.

a. What is the price of this bond today?

b. What is the current yield for this bond?

c. Why is the current yield different from the currentmarket rate of this bond?

PLEASE SHOW HOW YOU WOULD GET ANSWERS ONEXCEL!!

Answer & Explanation Solved by verified expert
4.5 Ratings (1152 Votes)
a What is theprice of this bond todayBond Valuation The value of bond is the present value of theexpected cashflows from the bonddiscounted at Yield toMaturityYTMPrima facie the bond will trade at    See Answer
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Transcribed Image Text

A semi-annual corporate bond has a coupon rate of 9percent per year. The face value is $1,000. The market interestrate (yield to maturity) for this bond today is 10.5 percent. Thisbond has 25 years before maturity.a. What is the price of this bond today?b. What is the current yield for this bond?c. Why is the current yield different from the currentmarket rate of this bond?PLEASE SHOW HOW YOU WOULD GET ANSWERS ONEXCEL!!

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