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You want to buy a corporate bond for your portfolio. The bond has a 10 year maturity, $1,000 par value and makes semi-annual coupon payments.
You want to buy a corporate bond for your portfolio. The bond has a 10 year maturity, $1,000 par value and makes semi-annual coupon payments. The annual coupon rate is 6.5%. It has been two years since it was issued. Market interest rates have since dropped to 5%. What is the price the bond would currently be trading at? Four years after issue the company has run into trouble and its bonds are now trading at 96. What is the yield to maturity for the bonds?
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