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Birth: Once upon a time, the treasurer of Mighty Corporation (MCO) decided to issue a bond (hereafter: The bond ) The bond would have a
Birth:
Once upon a time, the treasurer of Mighty Corporation (MCO) decided to issue a bond (hereafter: The bond) The bond would have a 8-year life and promised that the holder of the bond would receive:
- Investors would pay $1000 to obtain the bond. In the future, they are promised to receive:
- 8 annual payments of $25,
- Along with the 8th payment, MCO promised to return the principal of $1,000.
Question #2:
The bond is bought by an insurance company. One year passes, the bond has made its first coupon payment, so it is effectively a 7 year bond. The interest rate/yield-to-maturity on the bond falls to 1.5%.
- A) What is the Coupon Yield on the bond?
- B) What is the price of the bond?
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