The prices of several bonds with face values of $1000 are summarized in the following table:

Bond

A

B

C

D

$941.55

$1079.60

$1123.39

$1000

Required:

For each bond, state whether it trades at a discount, at par, or at a premium.

Explain briefly the relationship between bond price and the Yield-to-maturity (YTM).

(15 marks)

ABC Inc. offers a 6.5% coupon bond with annual payments. The yield to maturity is 6.71% and the maturity date is 7 years from today. What is the market price of this bond if the face value is $1,000? What is the current yield on this bond? (10 marks)

XYZ Co. has a bond issue outstanding that pays an 8% coupon and matures in 14 years. The bonds have a par value of $1,000 and a market price of $942.90. Interest is paid semiannually. What is the yield to maturity (use the approximate YTM formula)? (5 marks)