You are offered to buy a 4 year coupon corporate bond at the beginning of its 7th month on its third year for $963.94. Its face value is $1000 and its coupon rate is 5.172% p.a. with a coupon paid at the end of each quarter. The government bond rate now is 6.9% Is $963.94 a good price for you to buy it or not? What is the fair price for the bond? What is the yield if buy at the price that you have been offered? If the government bond rate suddenly goes down to 4.7%, what will be the new fair value of the bond?

You are offered to buy a 4 year coupon corporate bond at the beginning of its 7th month on its third year for $963.94. Its face value is $1000 and its coupon rate is 5.172% p.a. with a coupon paid at the end of each quarter. The government bond rate now is 6.9% Is $963.94 a good price for you to buy it or not? What is the fair price for the bond? What is the yield if buy at the price that you have been offered? If the government bond rate suddenly goes down to 4.7%, what will be the new fair value of the bond?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter19: The Basic Tools Of Finance

Section: Chapter Questions

Problem 1CQQ

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