Anthony has a choice of one of two bonds to purchase a 5 year, $1,000 face value bond with 6 coupons, paid semiannually, or a 5 year, $1,000 face value zero coupon Both have a yield to maturity of 5 5 a How much will each bond cost b How much would Anthony pay for similar bonds, assuming a flat yie...

Anthony has a choice of one of two bonds to purchase: a 5-year, $1,000 face value bond

Question:

Anthony has a choice of one of two bonds to purchase: a 5-year, $1,000 bond with 6% coupons, paid semiannually, or a 5-year, $1,000 zero Both have a yield to of 5.5%.
a. How much will each bond cost?
b. How much would Anthony pay for similar bonds, assuming a flat yield curve, if they were available in dates of 10 years? 15 years?
c. Explain why the zero bond prices change more than the regular bonds? Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...