Problem 13-01

A $1,000 bond has a coupon of 7 percent and matures after eight years. Assume that the bond pays interest annually.

What would be the bond's price if comparable debt yields 10 percent? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar.

$

What would be the price if comparable debt yields 10 percent and the bond matures after four years? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar.

$

Why are the prices different in a and b? The price of the bond in a is -Select-lessgreaterItem 3 than the price of the bond in b as the principal payment of the bond in a is -Select-further outcloserItem 4 than the principal payment of the bond in b (in time).

What are the current yields and the yields to maturity in a and b? Round your answers to two decimal places.

The bond matures after eight years:

CY: % YTM: %

The bond matures after four years:

CY: % YTM: %