Fitzgerald's 30-year bonds pay 7 percent interest annually on a $1,000 par value. If the bonds sell at $885, what is the bond's yield to maturity? What would be the yield to maturity if the bonds paid interest semiannually? Explain the difference. Question content area bottom Part 1 a. The bond's yield to maturity if the bond pays interest annually is enter your response here%. (Round to three decimal places.) Part 2 b. The bond's yield to maturity if the bond paid interest semiannually would be enter your response here%. (Round to three decimal places.) Part 3 c. Based on the findings in parts a and b, which of the following statements is correct? (Select the best choice below.) A. Other things being equal, the YTM is the same for both an annual bond and a semiannual bond if the bond is selling at a premium. B. Other things being equal, the YTM is the same for both an annual bond and a semiannual bond if the bond is selling at a discount. C. Other things being equal, the YTM is higher for a semiannual bond than an annual bond if the bond is selling at a discount. D. Other things being equal, the YTM is higher for an annual bond than a semiannual bond if the bond is selling at a discount.
Fitzgerald's 30-year bonds pay 7 percent interest annually on a $1,000 par value. If the bonds sell at $885, what is the bond's yield to maturity? What would be the yield to maturity if the bonds paid interest semiannually? Explain the difference. Question content area bottom Part 1 a. The bond's yield to maturity if the bond pays interest annually is enter your response here%. (Round to three decimal places.) Part 2 b. The bond's yield to maturity if the bond paid interest semiannually would be enter your response here%. (Round to three decimal places.) Part 3 c. Based on the findings in parts a and b, which of the following statements is correct? (Select the best choice below.) A. Other things being equal, the YTM is the same for both an annual bond and a semiannual bond if the bond is selling at a premium. B. Other things being equal, the YTM is the same for both an annual bond and a semiannual bond if the bond is selling at a discount. C. Other things being equal, the YTM is higher for a semiannual bond than an annual bond if the bond is selling at a discount. D. Other things being equal, the YTM is higher for an annual bond than a semiannual bond if the bond is selling at a discount.
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 10P
Related questions
Question
(Yield to maturity) Fitzgerald's
30-year
bonds pay
7
percent interest annually on a
$1,000
par value. If the bonds sell at
$885,
what is the bond's yield to maturity? What would be the yield to maturity if the bonds paid interest semiannually? Explain the difference.Question content area bottom
Part 1
a. The bond's yield to maturity if the bond pays interest annually is
enter your response here%.
(Round to three decimal places.)Part 2
b. The bond's yield to maturity if the bond paid interest semiannually would be
enter your response here%.
(Round to three decimal places.)Part 3
c. Based on the findings in parts a and
b,
which of the following statements is correct? (Select the best choice below.)Other things being equal, the YTM is the same for both an annual bond and a semiannual bond if the bond is selling at a premium.
Other things being equal, the YTM is the same for both an annual bond and a semiannual bond if the bond is selling at a discount.
Other things being equal, the YTM is higher for a semiannual bond than an annual bond if the bond is selling at a discount.
Other things being equal, the YTM is higher for an annual bond than a semiannual bond if the bond is selling at a discount.
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