Question
1. A corporate bond with a semi-annual pay coupon of 4.375% matures on January 15, 2036. The yield to maturity for bonds of this tenor
1. A corporate bond with a semi-annual pay coupon of 4.375% matures on January 15, 2036. The yield to maturity for bonds of this tenor and rating is 3.892%. Compute the flat and full price of the bond (assuming no change in yields) for the following settlement dates: March 15, 2023 April 30, 2023 May 18, 2023 June 22, 2023 July 10, 2024 July 18, 2024
1. Describe the pattern in the flat price of the bond over these dates.
2. Describe the pattern in the full price of the bond over these dates.
3. Which of the above dates has the largest difference between full and flat price? Why?
Step by Step Solution
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Step: 1
1 Flat price The flat price of the bond will increase as the settlement date approaches This is because the accrued interest will increase as the sett...
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
10th Canadian edition
1259261018, 1259261015, 978-1259024979
