Question
2. Suppose the US government issued a 10 year, 10% semi-annual coupon bond on Jan 15, 2010. The face value is $1000, due on Jan.
2. Suppose the US government issued a 10 year, 10% semi-annual coupon bond on Jan 15, 2010. The face value is $1000, due on Jan. 15, 2020.
a. On Jan. 16, 2016, the bond is traded on the secondary market for $800, what is the implied YTM on the bond?
b. Also on Jan. 16, 2016, the US government issued a new bond, with 4 years to maturity, 7% semi-annual coupon rate, and face value of $1000. If the new bond and old bond have the same risk, what would be the YTM of the new bond? What should be the price of the new bond?
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International Finance Theory And Policy
Authors: Paul R. Krugman, Maurice Obstfeld, Marc J Melitz,
11th Edition
013451954X, 9780134519548
