Suppose a 10-year, $1,000 bond with a 8% coupon rate and semiannual coupons is trading for a price of $1,135.41.
a. What is the bond's yield to maturity (expressed as an APR with semiannual compounding)?
b. If the bond's yield to maturity changes to 8% APR, what will the bond's price be?
a.
Calculating Yield to Maturity,
Using TVM Calculation,
I = [PV = -1,135.41, FV = 1,000, PMT = 40, N = 20]
I = 6.17%
b.
Calculating Bond Price,
Using TVM Calculation,
PV = [FV = 1,000, PMT = 40, N = 20, I = 0.08/2]
PV = $1,000
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