Question
AliMama Company has a semi-annual coupon discount bond which pays a 7% coupon. The bond has a YTM of 9%, and has thirteen years to
AliMama Company has a semi-annual coupon discount bond which pays a 7% coupon.
The bond has a YTM of 9%, and has thirteen years to maturity.
a) If interest rates and YTM remain unchanged, calculate the price of this bond as at
today, in 8 years, and in 13 years respectively.
b) Explain why the price of the discount bond like the above would increase when the
time is closer and closer to maturity.
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Fundamentals of Corporate Finance
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
11th edition
77861701, 978-0077861704
