Assignment #$2$: Bond Valuation and Capital Markets History

Suppose you read in the Wall Street Journal that a bond with face value $$1000,$ coupon rate of $5\%,$ and

$10$ years $($remaining$)$ to maturity. Current market conditions are such that the bond sells for $$940.$

What is the bond's current yield? What is the yield to maturity on this bond?

Consider a bond selling at par $($ $$1000)$ with a coupon rate of $6\%$ and $10$ years to maturity. $($Assuming

semi$-$annual coupon payments$)$

$($a$)$ What is the price of this bond if the required yield is $8\%?$

$($b$)$ What is the price of this bond if the required yield increases from $8\%$ to $9\%,$ and by what percentage

did the price of this bond change?

Twitchy $-$ a kind of junk bond $-$ carries a $10\%$ coupon rate, has a $$1,000$ face value and matures in $5$

years. What is the change in the implicit required return $($that is$,$ YTM$)$ of Twitchy, if the current

market price of Twitchy, which is $$950,$ falls to $$850?$

a$.-4\mathrm{.}10\%$

b$.+2\mathrm{.}96\%$

c$.+11\mathrm{.}34\%$

d$.-14\mathrm{.}30\%$