1. If a bond\'s coupon rate is equal to the market rate, then the bond will sell
ID: 2661198 • Letter: 1
Question
1. If a bond's coupon rate is equal to the market rate, then the bond will sell
none of these are true.
at a price less than its face value.
at a price equal to its face value.
at a price greater than its face value.
3. Pullman Corp issued 10-year bonds four years ago with a coupon rate of 9.23 percent. At the time of issue, the bonds sold at par. Today bonds of similar risk and maturity must pay an annual coupon of 5.29 percent to sell at par value. Assuming semiannual coupon payments, what will be the current market price of the firm
none of these are true.
Explanation / Answer
1
at a price equal to its face value.
2
Semiannual payments = 4.67
r = 9.8/2 = 4.9%
N- 5*2 =10 periods of payments
Present value of bond = $ 98.215
3
r=9,23/2 = 4.615
N=2*10 = 20 payments
Semiannual payments = 5.29/2 = 2.645
FV=100
Present Value= $74.63
4
R= 8.26/2 = 4.135
FV= 1000
N=2*10 =20
Present Value = $445.126
5
N=14
P=366.24
FV=1000
R/2 = 7.4384
Yield to maturity = 14.8768
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.