Ch 5 7 and 8

the coupon rate? 7. Carol Chastain purchases a 1-year discount bond with a $1,000 face value for $862.07. What is the yield of the bond? 8. David Hoffiman purchases a $1,000 20-year bond with an 8 percent coupon rate (annual payments). Yields on compara- What is the expected percen c. If interest rates are expe points, what is the expecte What is the expected perce ble bonds are 10 percent. David expects that, 2 years from now, yields on comparable bonds will have declined to 9 per- 16. Explain the convexity of a cent. Find his expected yield, assuming the bond is sold under what circumstances is co 17. When reducing interest in 2 years. 1 000 4 year bond with an c matching superior to maturity