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Consider a corporate bond with the following characteristics: The face value = $1,000 The coupon rate = 8% per annum Coupon payments = Semi-annually Remaining
Consider a corporate bond with the following characteristics: The face value = $1,000 The coupon rate = 8% per annum Coupon payments = Semi-annually Remaining term to maturity = 10 years Current yield-to-maturity = 9% per annum (1) Find the current price of the bond (2 marks) (ii) Suppose after six months from today, the yield-to-maturity of the bond is expected to decline to 7% per annum from its current level of 9% per annum. What is the expected price of the bond after six months from today? (5 marks) (iii) Suppose Ms. Taylor buys this bond today and will sell the bond after six months. Calculate the rate of return on her investment over six months
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