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Consider a bond with 2 years to maturity, Face (Par) Value = $1,000, 10% annual coupon rate, semi-annual coupon payments and YTM= 3% per
Consider a bond with 2 years to maturity, Face (Par) Value = $1,000, 10% annual coupon rate, semi-annual coupon payments and YTM= 3% per 6 months. The bond price now is $1,074.32. a) Suppose that 6 months later, right after the coupon payment, the YTM of the bond still is 3% per 6 months. What is the market price of the bond? What is the HPR of buying the bond today and selling it then? b) Suppose that 6 months later, right after the coupon payment, the YTM has gone down to 2.7% per 6 months. What is the market price of the bond? What is the HPR of buying the bond today and selling it then? Express this HPR as an APR rate with semi-annual compounding and as an EAR.
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a YTM Remains at 3 Market Price After receiving the coupon payment the bonds remaining value will be ...Get Instant Access to Expert-Tailored Solutions
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