Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are offered to buy a 4-year corporate bond in the beginning of its 7th month on its third year for $963.94. its face value

You are offered to buy a 4-year corporate bond in the beginning of its 7th month on its third year for $963.94. its face value is $1,000 and its coupon rate is 5.172% p.a. with coupon paid at the end of each quarter. Government bond rate now is 6.9%. a) Is $963.94 a good price for you to buy it or not? What is the fair price for the bond?(4 marks) b) What is the yield if you buy at the price that you have been offered? (3marks) c) If the government bond rate suddenly goes down to 4.7%, what will be the new fair value of the bond? (3 marks)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Routledge Handbook Of Financial Technology And Law

Authors: Iris Chiu, Gudula Deipenbrock

1st Edition

0367344149, 978-0367344146

More Books

Students also viewed these Finance questions

Question

Answered: 1 week ago

Answered: 1 week ago

Question

The nature and importance of the global marketplace.

Answered: 1 week ago