Question
Bill buys a $65000 face value bond. The coupon rate on the bond is 5% and it mature in 7 years. The current interest rate
Bill buys a $65000 face value bond. The coupon rate on the bond is 5% and it mature in 7 years. The current interest rate is 6.750000000000001% compounded quarterly. a) How much should Bill pay for the bond? b) Is he buying it at a premium or a discount? How much is the premium/discount? c) Construct the first 4 rows of the amortization table for this bond. d) How long (how many coupon periods) until the premium/discount on the bond is less than half the initial premium/discount? e) What would the current interest rate have to be so that the initial premium/discount on the bond doubles?
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