Question 12, P 6-17 (similar to)

Part 1 of 2

HW Score: 56.67%, 8.5 of 15 points

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Suppose a seven-year,

$1,000

bond with

an

8.4%

coupon rate and semiannual coupons is trading with a yield to maturity of

6.27%.

a. Is this bond currently trading at a discount, at par, or at a premium? Explain.

b. If the yield to maturity of the bond rises to

7.01%

(APR with semiannual compounding), what price will the bond trade for?