a. A coupon bond pays $100 per year with 1000 price. What is the return of the
Fantastic news! We've Found the answer you've been seeking!
Question:
a. A coupon bond pays $100 per year with 1000 price. What is the return of the bond for one year if the YTM was initially 10% and increased at the end of year to 5%?
b. A consol (perpetuity) that pays $100 per year with 1000 price. What is the return of the bond for one year if the YTM was initially 10% and increased at the end of year to 5%?
c. Compare the return of the consol to the return of coupon bond and explain why there is a difference between the two returns.
Posted Date: