Question
Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 8.7 percent, a YTM of 6.7 percent, and has
Bond X is a premium bond making semiannual payments. The bond has a coupon rate of 8.7 percent, a YTM of 6.7 percent, and has 20 years to maturity. Bond Y is a discount bond making semiannual payments. This bond has a coupon rate of 6.7 percent, a YTM of 8.7 percent, and also has 20 years to maturity. Assume the interest rates remain unchanged and both bonds have a par value of $1,000. What are the prices of these bonds today? What do you expect the prices of these bonds to be in one year? What do you expect the prices of these bonds to be in three years? What do you expect the prices of these bonds to be in eight years? What do you expect the prices of these bonds to be in twelve years? What do you expect the prices of these bonds to be in twenty years?
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