Question
Consider the following three bonds: Bond P Bond Q Bond R Per Value $1000 $1000 $1000 Coupon Rate 5.00% 5.50% 0% Time to maturity 3yrs
Consider the following three bonds:
| Bond P | Bond Q | Bond R | |
| Per Value | $1000 | $1000 | $1000 |
| Coupon Rate | 5.00% | 5.50% | 0% |
| Time to maturity | 3yrs | 5yrs | 6yrs |
| Required yield | 4.00% | 7.00% | 5.20% |
(a) Explain the term coupon rate. (b) Calculate the present values of each bond. State whether the bond is above par, at par or below par. (c) Bond ratings are an important element of the bond market. Explain what bond ratings are, who issues the ratings, and what the ratings mean to the average investor.
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The Budget Building Book For Nonprofits
Authors: Murray Dropkin, Jim Halpin, Bill La Touche
2nd Edition
0787996033, 978-0787996031
