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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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