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Consider a bond paying a coupon rate of 8% per year annually when the market interest rate is 6% per year. The bond has six
Consider a bond paying a coupon rate of 8% per year annually when the market interest rate is 6% per year. The bond has six years until maturity and its par value is $1000. What are the bond's price today (P0), its price 1 year from now after the next coupon is paid (P1), and its holding period return (r) over the 1-year period? Assume market interest rate stays the same after 1 year.
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