Question
A corporate bond has six years remaining to maturity; a par value of $100,000; a 9.00 percent yield to maturity; and a price of 88.33%
A corporate bond has six years remaining to maturity; a par value of $100,000; a 9.00 percent yield to maturity; and a price of 88.33% of par value.
a. If the bond has annual payments, what is the bonds coupon rate? Explain your answer.
b. If the bond has semi-annual payments, what is the bonds coupon rate? Explain your answer.
c. A rich uncle is giving Patrick, as a gift, one of the two bonds: (i) bond with annual payments or (ii) bond with semi-annual payments. Which bond should Patrick select or is he indifferent between the two bonds? Explain your answer.
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