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You are a financial analyst, and tries to price a new bond that is scheduled to be issued by Firm A. This new bond has
You are a financial analyst, and tries to price a new bond that is scheduled to be issued by Firm A. This new bond has the following characteristics: The bond has an annual coupon rate of 10%, but paid semi- annually. The bond has a face value of $1,000. The bond has a term to maturity of 4 years. Now you need a YTM to work with this bond A. You find that there is a bond B in the market that has very similar risk profile to bond A. The bond B characterstics are as follows: Bond B has an annual coupon rate of 8%, but paid semi- annually. Bond B has a face value of $1,000. Bond B has a term to maturity of 5 years. Bond B is priced at $800 in the market. Calculate the following: The YTM (APR) of bond B The price of bond A Show your calculations. Important hint: remember to pay special attention to APR, discount rate, and time periods used in the calculation
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