Suppose a​ seven-year, $1,000 bond with a 5.98% coupon rate and semiannual coupons is trading with a yield to maturity of 4.01%. a. Is this bond currently trading at a​ discount, at​ par, or at a​ premuim? Explain. b. If the yield to maturity of the bond rises to 4.37% ​(APR with semiannual​ compounding), at what price will the bond​ trade?

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 8MC: Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for...
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Suppose a​ seven-year, $1,000 bond with a 5.98% coupon rate and semiannual coupons is trading with a yield to maturity of 4.01%.
a. Is this bond currently trading at a​ discount, at​ par, or at a​ premuim? Explain.
b. If the yield to maturity of the bond rises to 4.37% ​(APR with semiannual​ compounding), at what price will the bond​ trade?
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