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Problem 2. A corporate bond has a face value of $1,000 and a coupon rate...

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Finance

Problem 2. A corporate bond has a face value of $1,000 and a coupon rate of 6% per annum. Coupons are paid every 6 months. The bond matures in 8 years. The bond is callable on or after 5 years on coupon payment dates, and pays $1,030 if called. [a] If the bond is trading at $800, calculate its CY, YTM, YTC and YTW. [b] If the bond is trading at $1,100, calculate its CY, YTM, YTC and YTW. [observation] Do you see the difference between discount bonds and premium bonds?

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