Masters Corp. issues two bonds with 15-year maturities. Both bonds are callable at $1,120. The first bond is issued at a deep discount with a coupon rate of 7% to yield 14.4%. The second bond is issu...

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Masters Corp. issues two bonds with 15-year maturities. Both bonds are callable at $1,120. The first bond is issued at a deep

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Answer 1

Answer #1

a: YTM of the par bond = Coupon rate = 15.6%

b: Bond with a coupon rate of 15.6%

Higher the coupon rate , higher will be the increase in its price due to drop in the Interest rates .This is because the demand will be higher for the higher coupon bond when it is compared with the market interest rates.

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Answer 2

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Masters Corp. issues two bonds with 15-year maturities. Both bonds are callable at $1,120. The first bond is issued at a deep discount with a coupon rate of 7% to yield 14.4%. The second bond is issu...

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Masters Corp. issues two bonds with 15-year maturities. Both bonds are callable at $1,120. The first bond is issued at a deep discount with a coupon rate of 7% to yield 14.4%. The second bond is issu...

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Add Answer to: Masters Corp. issues two bonds with 15-year maturities. Both bonds are callable at $1,120. The first bond is issued at a deep discount with a coupon rate of 7% to yield 14.4%. The second bond is issu...

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Add Answer to:
Masters Corp. issues two bonds with 15-year maturities. Both bonds are callable at $1,120. The first bond is issued at a deep discount with a coupon rate of 7% to yield 14.4%. The second bond is issu...