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Part B Suppose a seven-year, $1,000 bond with a 5.41% coupon rate and semiannual coupons is trading with a yield to maturity of 4.30%. a.
Part B
Suppose a seven-year, $1,000 bond with a 5.41% coupon rate and semiannual coupons is trading with a yield to maturity of 4.30%. a. Is this bond currently trading at a discount, at par, or at a premuim? Explain. b. If the yield to maturity of the bond rises to 4.85% (APR with semiannual compounding), at what price will the bond trade? a. Is this bond currently trading at a discount, at par, or at a premuim? Explain. The bond is currently trading... (Select the best choice below.) A. ... at a premium because the coupon rate is greater than the yield to maturity B. ... at par because the coupon rate is equal to the yield to maturity C. ... at a discount because the coupon rate is greater than the yield to maturity D. ... at a premium because the yield to maturity is greater than the coupon rate. b. If the yield to maturity of the bond rises to 4.85% (APR with semiannual compounding), at what price will the bond trade? The bond will trade for $ (Round to two decimal places.) Step by Step Solution
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