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Bond 2 Coupon rate 6.8% Annual coupon frequency 2 Par $1,000 Time to maturity (years) 5 c) the realized compound yield for Bond 2 if

Bond 2

Coupon rate

6.8%

Annual coupon frequency

2

Par

$1,000

Time to maturity (years)

5

c) the realized compound yield for Bond 2 if the current price is $1000 and the semi-annual coupons are reinvested at an annual rate of 2% until the bond matures.

d) the realized compound yield for Bond 2 if the current price is $1000 and the semi-annual coupons are reinvested at an annual rate of 2% until the bond is sold in 3 years for $1,050.

e) Suppose the yield to maturity for Bond 2 changes from 5% to 4.75%. Compute the bonds price at each YTM. What is the percentage difference in price? Compute the percentage as the (price when YTM is 4.75% - price when YTM is 5%) / price when YTM is 5%.

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