Question
1. A corporation issues a bond with a 10-year maturity and a 4:00% coupon. If this bond begins to trade in the secondary market at
1. A corporation issues a bond with a 10-year maturity and a 4:00% coupon. If this bond begins to trade in the secondary market at a 4.15% YTM; what is the bonds dollar price per $1000.00 par value?
2. XYZ Corporation issued a 30-year bond 10 years ago. The bond has a 7.50% coupon. If this bond is now trading at a 4.50% YTM; what is its current dollar price?
3. What would happen to the price of the bond in question #1; if after being in the market for 1 year, its YTM falls to 3.90%? What term do we use to describe this bond in terms of its new price?
4. The bond in question #2 is now at the end of its 11th year of maturity since being issued. What is its YTM if its current price is $1,220.50?
5. What happened to the price of the bond in question #4? Why did this bonds value change?
6. What is the YTM for a U.S. Treasury 0 coupon bond that has 25 years left to maturity and is currently priced at $679.10?
Do not need to solve questions 1&2.
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