Question
1) The City of Ames issued a new series of bonds on Jan 1, 2009. The bonds were sold at par ($1,000), have a 2.0%
1) The City of Ames issued a new series of bonds on Jan 1, 2009. The bonds were sold at par ($1,000), have a 2.0% annual coupon rate and mature in 10 years, on Jan 1, 2019. Coupon interest payments are made semi-annually (on June 30 and December 31).
(A) What was the Semi-Annual Current Yield of this bond on January 1, 2012 assuming that you just paid $900.00 for it? _________________
(B) Assuming that the level of interest rates had risen to 3%, what should be the price of the bond on January 1, 2011 (16 coupon payments left)? _________________
(C) On July 1, 2012, you purchased the bond for $950 (you purchased it just after the coupon payment was paid for June). What was the semi-annual Yield to Maturity (YTM) at that date (13 coupon payments left)? _________________
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