Question
Rocket Enterprises has a 20-year bond issue outstanding that pays a 5% coupon. The bond is currently prices at $915.60 and has par value of
Rocket Enterprises has a 20-year bond issue outstanding that pays a 5% coupon. The bond is currently prices at $915.60 and has par value of $1,000. The bond also pays coupons semiannually. You just purchase ten of them as investment. I What is the yield to maturity of the bond you hold? II Five years go by and interest rates in the economy goes down by 2% and Rocket Enterprises bonds YTM also declines by 2%. Unfortunately, you desperately need cash and will have to sell your bonds. Your friend offers $1,100 for each. Would you sell to your friend? Why or why not?
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