Question
FMA Inc has issued a $1000 par value bond that matures in 12 years. The bond pays semi-annual coupons at a rate of 12% APR
FMA Inc has issued a $1000 par value bond that matures in 12 years. The bond pays semi-annual coupons at a rate of 12% APR compounded semi-annually, with first coupon payment due 6-months from today. If the market requires a 9% yield to maturity on this bond, the bond will be priced at $__________ , and 6 years later the bond will be priced at $__________ , all else constant. Therefore, premium bond prices will _______________ as maturity approaches, all else constant.
(Round bond prices to nearest $. Enter "increase" or "decrease" in the final blank).
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