As a treasurer, you must have a good knowledge of the credit market. To assess...
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As a treasurer, you must have a good knowledge of the credit market. To assess two distinct bond types, namely bond A and bond B. These two bonds have a maturity date of 10 years and are payable semi-annually. They have a par value of $1,000 and a yield to maturity of 6.5% per annum. Bond A is a zero coupon bond, but Bond B has an annual coupon rate of 7.5%.
Required:
Determine the current yield and price of bonds A and B. Then, explain if bond A and bond B are selling at a discount, premium, or par.
As a treasurer, you must have a good knowledge of the credit market. To assess two distinct bond types, namely bond A and bond B. These two bonds have a maturity date of 10 years and are payable semi-annually. They have a par value of $1,000 and a yield to maturity of 6.5% per annum. Bond A is a zero coupon bond, but Bond B has an annual coupon rate of 7.5%.
Required:
Determine the current yield and price of bonds A and B. Then, explain if bond A and bond B are selling at a discount, premium, or par.
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