Question
1) What is the value of a 10-year, 10% annual coupon bond, if the required rate of return on this bond (rd) is 10%? a)
1) What is the value of a 10-year, 10% annual coupon bond, if the required rate of return on this bond (rd) is 10%?
a) Assuming other things equal, what is the value of this bond 3 years later?
2)What is the value of a 10-year, 10% semiannual coupon bond, if the required rate of return on this bond is 13%?
3) Consider a $1,000 par value bond with an 8% semiannual coupon. There are 10 years remaining until maturity. Assume that the required return on the bond is 6%.
a)Assume the current market price is $1150. Should you buy or sell this bond today? At what price?
b)Assume investor XXX buys the bond $1150 today and holds it for 6 months. After receiving the coupon, investor XXX sells the bond for $1040. What is investor XXX's return rate in 6 months?
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