Question
A Bell Canada bond carries a coupon rate of 8%, payable semi-annually and has 9 years until maturity. It has a yield to maturity (YTM
A Bell Canada bond carries a coupon rate of 8%, payable semi-annually and has 9 years until maturity. It has a yield to maturity (YTM /yield rate) of 9 %.
a. What price does the bond sell?
b. What will the price be if the bond yield drops to 7%?
c. If Bell Canada incurred a considerable amount of debt what would happen to the price of the bond? Explain.
d. If Bell Canada incurred a considerable amount of debt what would happen to the coupon rate? Explain.
e. Give two reasons that could cause the yield rate to drop on a bond.
f. As a bond trader what is your strategy when purchasing bondswhat are you betting on?
g. What are bond covenants and what is their purpose?
h. If you bought a 10 year bond 10 years ago and it just matured, did changes in the yield rate over its term matter to you? Explain.
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