Question
Consider a Russian government bond with a maturity of one year. Its face value is 100 Rubels and it pays a coupon of 10 Rubels
Consider a Russian government bond with a maturity of one year. Its face value is 100 Rubels and it pays a coupon of 10 Rubels (there is one remaining coupon payment, which occurs together with the face value). Its current market price is 100 Rubels. In response to international sanctions, Russia announces that it will stop paying coupons to its investors, but that it will still pay the face value on any outstanding bonds. In response to the announcement, the the bond price drops to 80 Rubels. What is the yield to maturity, before and after the government's announcement?
A. Before: 10%; After: 20%
B. Before: 25%; After: 10%
C. Before: 10%; After: 10%
D. Before: 10%; After: 25%
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Introduction to Operations Research
Authors: Frederick S. Hillier, Gerald J. Lieberman
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978-0072535105, 72535105, 978-1259162985
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