Suppose a seven-year,

$ 1 comma 000$1,000

bond with

anan

8.3 %8.3%

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

6.63 %6.63%.

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

7.45 %7.45%

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

a. Is this bond currently trading at a discount, at par, or at a premium? Explain.(Select the best choice below.)

A.

Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium.

B.

Because the yield to maturity is less than the coupon rate, the bond is trading at a premium.

Your answer is correct.

C.

Because the yield to maturity is less than the coupon rate, the bond is trading at a discount.

D.

Because the yield to maturity is greater than the coupon rate, the bond is trading at par.

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

7.45 %7.45%

(APR with semiannual compounding), what price will the bond trade for?The new price of the bond is