Question
A 10 year bond has a par value of 20,000 and is redeemable at par. Coupons are semiannual and pay a (nominal) yearly rate of
A 10 year bond has a par value of 20,000 and is redeemable at par. Coupons are semiannual and pay a (nominal) yearly rate of 12 percent.
Find the price if the investor wishes to earn 8 percent annual interest. Identify if this is premium or a discount situation.
Find the book value at 2, 5 and 9 years (immediately after the coupon was paid.
Find the dirty (theoretical and practical) and clean (theoretical and prac- tical) values of the bond at 4.25 years.
Suppose the bond is sold immediately after the 10th coupon (5th year) is given and the buyer wants to earn 6 percent interest. What is the selling price?
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