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A bond has 7.5 years to go to maturity. The coupon on the bond is 6%. The current market price of the bond is $1250.00
A bond has 7.5 years to go to maturity. The coupon on the bond is 6%. The current market price of the bond is $1250.00
- Make an INTELLIGENT guess as to what the yield to maturity of the bond is. (Note: I am asking for a guess, not an accurate number. I do not really care how accurate a guess you have, as long as it is an intelligent guess.)
- Calculate what the price of the bond would be IF the your guess for the yield to maturity in part (a) was the actual yield to maturity of the bond.
- Based on your answer in part (b), was your guess in part (a) too high or too low?
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