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Smith Corporation has a $1000 par value bond outstanding paying annual interest of 8% (coupon rate). The bond matures in 10 years. If the present
Smith Corporation has a $1000 par value bond outstanding paying annual interest of 8% (coupon rate). The bond matures in 10 years. If the present yield to maturity for this bond is 6%, calculate the annual coupon payment (annual interest payment) and current price of the bond using annual compounding. (8 points)
What is the annual coupon payment? __________________________________ (6 points)
What is the current price of the bond? __________________________________ (6 points)
Does par value change if the yield to maturity changes? (yes / no) _____________ (2 points)
Does the coupon rate change if the yield to maturity increases? (yes / no) _______ (2 points)
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