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Four years ago, Beer Necessities Inc. (BN) issued a bond with a $1,000 face value, semi-annual coupons, 8% coupon rate, and 20-year maturity. The bond
Four years ago, Beer Necessities Inc. (BN) issued a bond with a $1,000 face value, semi-annual coupons, 8% coupon rate, and 20-year maturity. The bond originally (four years ago) sold at par. Today, the yield-to-maturity is 9%. (a) How much do BN bonds sell for today? Reminder: yield-to-maturity is quoted as a semi-annually compounded APR. (b) Suppose that one year from now the price of BN bonds is $1,196. What is the corresponding yield-to-maturity (i.e. the YTM one year from today)?
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