Donald purchases a 15-year bond that pays semi-annual coupons at 5% annual coupon rate. He pays...
Donald purchases a 15-year bond that pays semi-annual coupons at 5% annual coupon rate. He pays 2,345 for the bond, which can be called at its par value X on any coupon date starting at the end of year 10. The price guarantees that Donald will receive a yield of at least 4% convertible semi-annually. Joe purchases a 15 year bond identical to Donald's, except it is not callable. Assuming the same yield, what is the price of Joe's bond.
Homework Answers
As the bond is guaranteeing yield of 4% and being called at par,
the bond price would be lowest when bond is held till
maturity
Hence, Price of Joe's bond=2345
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