Consider a two-year bond with a face value $1000 and a coupon rate 4.2% paid annually. (a) On the market, the 2-year interest rate is 3%. What is the fair market price for this bond? (b) When the interest rate increases to 5%, what would the bond price become? (c) What if the interest rate falls to 1%?

Consider a two-year bond with a face value $1000 and a coupon rate 4.2% paid annually. (a) On the market, the 2-year interest rate is 3%. What is the fair market price for this bond? (b) When the interest rate increases to 5%, what would the bond price become? (c) What if the interest rate falls to 1%?

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 5MC: What would be the value of the bond described in Part d if, just after it had been issued, the...

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