Suppose that you are considering investing in a four-year bond that has a face value of...
Suppose that you are considering investing in a four-year bond that has a face value of $1.000 and a
coupon rate of 5.4%.
a.) If the market interest rate on similar bonds is 5.4%, the price of the bond is $1000 (Round your response to the nearest cent.)
The bond's current yield is 5.4%. (Round your response to two decimal places.)
b.) Suppose that you purchase the bond, and the next day the market interest rate on similar bonds falls to
4.4%.
The price of the bond will be $?. (Round your response to the nearest cent.)
Please explain and show your work. This question will have 7 more parts (each part unlocks after I answer). So having an understanding of the thought process is critical. Further note I try to set up my calculations in Google Sheets. Please show any formulas and how you calculated them.
Homework Answers
The price of the bond as per the conditions mentioned in the
question can be calculated with the help of the expalination given
below :
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