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Bond X is a premium bond making annual payments. The bond has a coupon rate of 9%, a YTM of 7% and has 13 years
Bond X is a premium bond making annual payments. The bond has a coupon rate of 9%, a YTM of 7% and has 13 years to maturity. Bond Y is a discount bond making annual payments. The bond has a coupon rate of 7%, a YTM of 9% and has 13 years to maturity. What are prices of the bonds today? If interest rates remain unchanged, what will the bond prices be in 1 year? 3 years? 5 years? 10 years? 13 years? Discuss what is happening with the bond prices over time.
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