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A firm issues 5-year bonds with a coupon rate of 6%, paid semiannually. The credit spread for this firm's 5-year debt is 1.2%. New 5-year
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A firm issues 5-year bonds with a coupon rate of 6%, paid semiannually. The credit spread for this firm's 5-year debt is 1.2%. New 5-year Treasury notes are being issued at par with a coupon rate of 5.1%.
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a) What should the price of the firm's outstanding 5-year bonds be if their face value is 3 $1,000?
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b) If the YTM at the beginning of the third year of the bond (3 years left to maturity) 4 increases to 8%. What was the percentage change in the price of the bond over the past two years?
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