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Two years ago, MTR issued $1,000 ten-year bonds that carry a coupon rate of 8% payable...

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Accounting

Two years ago, MTR issued $1,000 ten-year bonds that carry acoupon rate of 8% payable semi-annually.

a.) If you require an effective annual rate of return of 12%,how much are you willing to pay for the bond today?

b.) What will be the bond price if the yield to maturity fallsto 6% in one year?.

C.) From the answer computed in above part (b), identify, withbrief explanation (within 30 words), whether the bond is issued atpar, premium or discount without involving any calculation.

Answer & Explanation Solved by verified expert
4.3 Ratings (501 Votes)
Ans a 2 year ago MTR issued 1000 10 year Bond carry Interet rate 8 payable semi annually Effective annual rate of return 12 Bond Price Interest rate PVIFArn Redemption Value PVTFrn Face value    See Answer
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