Question
Suppose that Ally Financial Inc. issued a bond with 10 years until maturity, a face value of $1000, and a coupon rate of 8% (annual
Suppose that Ally Financial Inc. issued a bond with 10 years until maturity, a face value of $1000, and a coupon rate of 8% (annual payments). The yield to maturity on this bond when it was issued was 5%.
a. What was the price of this bond when it was issued? [10 points]
b. Assuming the yield to maturity remains constant, what is the price of the bond immediately before it makes its first coupon payment? [5 points]
c. Assuming the yield to maturity remains constant, what is the price of the bond immediately after it makes its first coupon payment. [5 points]
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