Question
Last year a firm issued 25-year, 12 percent annual coupon bonds at a par value of $1,000 with a yield to maturity of 7 percent.
Last year a firm issued 25-year, 12 percent annual coupon bonds at a par value of $1,000 with a yield to maturity of 7 percent. Suppose that now one year later the going yield rate drops to 6.5 percent. What is the new price of the bond?
Suppose instead that one year after issue the going interest rate increases to 8 percent (rather than 6.5%).
What is the bond price?
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Fundamentals Of Futures And Options Markets
Authors: John C. Hull
7th Edition
0136103227, 9780136103226
