Question
1. A $1,000 face value bond has a 7 percent coupon and pays interest semiannually. The bond matures in 10 years and has a yield
1. A $1,000 face value bond has a 7 percent coupon and pays interest semiannually. The bond matures in 10 years and has a yield to maturity (YTM) of 5 percent.
What is the current price of the bond?
What is the price if the YTM is 9 percent?
2.
A $1,000 face value bond has a 4 percent coupon and pays interest semiannually. The bond matures in 7 years and has a yield to maturity (YTM) of 5.5 percent.
What is the duration of this bond?
What if the coupon rate is 8 percent?
What can you say about the connection between coupon rate and duration?
3.
A $1,000 face value bond has a 6 percent coupon and pays interest semiannually. The bond matures in 8 years and has a yield to maturity (YTM) of 6.75 percent.
What is the market price of the bond?
How much would the price of the bond change if the interest rate changed to 6%?
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Principles Of Project Finance
Authors: E.R. Yescombe
1st Edition
0127708510, 978-0127708515
