Question

What is the value of a $1,000 par value six-year bond with a 6.75% coupon paid semi-annually that is priced to yield 5.95% $1,121.70 $1,033.03 $1,039.88 $986.06 Question 8 2 pts You own a three-year bond with a 4.50% coupon paid semi-annually. The bond is priced to yield 4.50%. If rates remain unchanged over the upcoming year the value of the bond will be: O Lower O Not enough information provided The same O Higher

Answer 1

Since the bond is semiannual coupon paying Face value of the bond = 1000 Coupon payment = 0.0675*1000*1/2 = 33.75 Number of periods = 6*2 = 12 yield rate = 5.95/2 = 2.975 price = ? Use financial calculator to calculate the price of the bond price = 1039.88 8) Its value will remain same. Since the bond coupon rate is equal to the yield rate so the bond will have been issued at par, at its face value. Since the bond was issued at its face value and the yield rate is equal to coupon rate for the upcoming years, Its value will remain the same.