Question
A bond with a face value of $1,000 matures in 9 years and has a 4% semiannual coupon. The bond currently is traded at $900.
A bond with a face value of $1,000 matures in 9 years and has a 4% semiannual coupon. The bond currently is traded at $900. Which of the following statements is CORRECT?
Select one:
a.The nominal yield to maturity is 5.42% and you would buy each bond for $900 if you think that a "fair" market interest rate (discount rate) for such bonds is 4.67%.
b.The nominal yield to maturity is 5.42% and you would buy each bond for $900 if you think that a "fair" market interest rate (discount rate) for such bonds is 9.59%.
c.The nominal yield to maturity is 4.80% and you would buy each bond for $900 if you think that a "fair" market interest rate (discount rate) for such bonds is 6.67%.
d.The nominal yield to maturity is 9.59% and you would buy each bond for $900 if you think that a "fair" market interest rate (discount rate) for such bonds is 8.67%.
e.The nominal yield to maturity is 8.62% and you would buy each bond for $900 if you think that a "fair" market interest rate (discount rate) for such bonds is 5.59%.
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