Question
The University of California has two bonds outstanding. Both issues have the same credit rating, a face value of $1,000 and a coupon rate of
The University of California has two bonds outstanding. Both issues have the same credit rating, a face value of $1,000 and a coupon rate of 4%. Coupons are paid twice a year. Bond A matures in 1 year, while bond B matures in 30 years.
The market interest rate for similar bonds is 9%.
1. What is the price of bond A?
2. What is the price of bond B?
3. Now assume that yields increase to 12%. What is the price of bond A?
4. What is now the price of bond B?
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Fundamentals of Financial Management
Authors: Eugene F. Brigham, Joel F. Houston
Concise 6th Edition
324664559, 978-0324664553
