Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. q3. bond x is a premium bond making semiannual pay

Q3. Bond X is a premium bond making semiannual payments. The bond pays 9 percent...

50.1K

Verified Solution

Question

Accounting

Q3. Bond X is a premium bond making semiannual payments. The bond pays 9 percent coupon, has a yield to maturity (YTM) of 6.5 percent and has 14 years to maturity. Bond Y is a discount bond making semiannual payments. This bond pays a 10 percent coupon, has a YTM of 11.5 percent and also has 16 years to maturity. The par value of the bond is $1,000,

a) What is the price of each bond today?

b) If interest rate remains unchanged what do you expect the price of these bonds to be one year from now? Price of these bonds in eight years from now? Price of these bonds in twelve years from now?

c) If the bonds sale price is $1,150 and has 9 years left from maturity with a face value of $1,000 and pays 15% coupon payment per year or 7.5% coupon semiannually, what is its Yield to Maturity (YTM). If it is a callable bond with call period of 4 years and call premium (if the bond is called) of $1,040 ($1,000 face value and $40 call premium) what is the Yield to Call (YTC) for this bond. Please note, the market price of this bond is $1,150. Also, note that coupon payments are made semiannually.

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students