You want to sell a bond for over $1000. Can you do that if the coupon...
You want to sell a bond for over $1000. Can you do that if the coupon rate is 6.5% and the bond yield is 6.8%?
Please use calculations for excel
Homework Answers
There is no need for excel.
The coupon rate is less than yield. Therefore, the bond CANNOT be sold over $1000. The bond will be sold at a discount, i.e., less than $1000. This is because the market is offering a higher interest of 6.8% than the coupon rate of 6.5%. The bondholder will be compensated for this lower coupon rate in the form of discount. The bond can only be sold over $1000 if coupon rate is more than yield.
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