(a) A 20 year $1000 face value coupon bond that pays an coupon rate of 12%. The YTM = 15%. Assume that the coupon payment is paid semi-annually. (b) Suppose that next year, the YTM falls to YTM = 13%. Calculate the new price of the bond from Part (a). [Hint: One year has passed since the bond was initially purchased.) (c) Use your answers from Parts (b) and (c) to calculate the one year holding period return of the coupon bond.

(a) A 20 year $1000 face value coupon bond that pays an coupon rate of 12%. The YTM = 15%. Assume that the coupon payment is paid semi-annually. (b) Suppose that next year, the YTM falls to YTM = 13%. Calculate the new price of the bond from Part (a). [Hint: One year has passed since the bond was initially purchased.) (c) Use your answers from Parts (b) and (c) to calculate the one year holding period return of the coupon bond.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 12P: Bond Yields and Rates of Return A 10-year, 12% semiannual coupon bond with a par value of 1,000 may...

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