A three-year junk bond has an annual coupon rate of 8%. If the yield for this...
A three-year junk bond has an annual coupon rate of 8%. If the yield for this type of bond increases to a 10% annual coupon rate, what should the bond with a coupon rate of 8% sell for in the secondary market?
Homework Answers
Using financial calculator
Input: FV= 1000
PMT=8%*1000 = 80
N=3
I/Y=10
Solve for PV as -950.26
The junk bond price will be $950.26
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