newconnect.mheducation.com Assignments: FA18:I AOL Mail (1961 Cheag Study HW 6 N
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newconnect.mheducation.com Assignments: FA18:I AOL Mail (1961 Cheag Study HW 6 NBA Basketball Scor Re: BUS-F370 Mi Campus Tutoring HowtaDoin FFL Scor Fantasy Football I HW 6 Saved Help Save & Exit Submit Check my work A bond with face value $1,000 has a current yield of7.8% and a coupon rate of 9.8%. a. If interest is paid annually, what is the bond's price? (Do not round intermediate calculations. Round your answer to 2 decimal places.) 9.09 points Bond price eBook b. Is the bond's yield to maturity more or less than 9.8%? Print More References Less Mc Graw Prev 1 of 11 Next>Explanation / Answer
Answer a.
Face Value = $1,000
Annual Coupon Rate = 9.80%
Annual Coupon = 9.80% * $1,000
Annual Coupon = $98
Current Yield = Annual Coupon / Current Price
0.078 = $98 / Current Price
Current Price = $1,256.41
Answer b.
If current price of the bond is higher than the face value of the bond, then coupon rate is higher than the yield to maturity.
So, Yield to Maturity is lower than 9.80%
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