Question
The three characteristics of a coupon bond are: When the coupon bond is priced at its face value, the yield to maturity equals the coupon
The three characteristics of a coupon bond are: When the coupon bond is priced at its face value, the yield to maturity equals the coupon rate; The price of a coupon bond and the yield to maturity are negatively related; The yield to maturity is greater than the coupon rate when the bond price is below its face value. Please illustrate the above characteristics using an imaginary 10%-Coupon-Rate Bond Maturing in ten years with a face value equals to $1,000, What will happen to the yield to maturity if the price of the bond is priced at 1200, 1100, 1000, 900 and 800 respectively? Show work.
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