If a bond's yield to maturity does not change, the return on the bond each year will be equal to the yield to maturity. Confirm this for both a premium and a discount bond using a 4-year 3 percent coupon bond with annual coupon payments and a face value of $1,000. Bond a. Assume the yield to maturity is 2 percent, what is the bond price today, what is the bond price in one year, and what is the rate of return? Bond b. Assume the yield to maturity is 4 percent, what is the bond price today, what is the bond price in one year, and what is t

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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If a bond's yield to maturity does not change, the return on the bond each year will be equal to the yield to maturity. Confirm this for both a premium and a discount bond using a 4-year 3 percent coupon bond with annual coupon payments and a face value of $1,000. Bond a. Assume the yield to maturity is 2 percent, what is the bond price today, what is the bond price in one year, and what is the rate of return? Bond b. Assume the yield to maturity is 4 percent, what is the bond price today, what is the bond price in one year, and what is t

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