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A firm issued a new series of bonds on January 1, 1992. The bonds were sold at par ($1,000), have a 12 percent coupon, and
A firm issued a new series of bonds on January 1, 1992. The bonds were sold at par ($1,000), have a 12 percent coupon, and mature in thirty years. Coupon payments are made semi-annually (on June 30 and December 31). (a) What was the yield to maturity of the bond on 1/1/92? (b) Calculate the price of the bond on 1/1/97, five years later, assuming that the level of interest rate has fallen to 10%. (c) If, on July 1, 2012, an investor expects the bonds
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