Question
2. value: 1.00 points A General Power bond with a face value of $1,000 carries a coupon rate of 8.3%, has 9 years until maturity,
2.
value: 1.00 points
A General Power bond with a face value of $1,000 carries a coupon rate of 8.3%, has 9 years until maturity, and sells at a yield to maturity of 7.3%. (Assume annual interest payments.) |
a. | What interest payments do bondholders receive each year? |
Interest payments | $ |
b. | At what price does the bond sell? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
Price | $ |
c. | What will happen to the bond price if the yield to maturity falls to 6.3%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
Price will | (Click to select) rise fall by | $ |
3.
value: 1.00 points
One bond has a coupon rate of 7.0%, another a coupon rate of 9.0%. Both bonds pay interest annually, have 5-year maturities, and sell at a yield to maturity of 8.0%. |
a. | If their yields to maturity next year are still 8.0%, what is the rate of return on each bond? (Do not round intermediate calculations. Enter your answers as a percent rounded to 1 decimal place.) |
| Rate of return |
Bond 1 | % |
Bond 2 | % |
b. | Does the higher-coupon bond give a higher rate of return? | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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