Suppose a seven-year, $1,000 bond with a 7.8% coupon rate and semiannual coupons is trading with a yield to maturity of 6.29%. a. Is this bond currently trading at a discount, at par, or at a premium? Explain. b. If the yield to maturity of the bond rises to 7.18% (APR with semiannual compounding), what price will the bond trade for? a. Is this bond currently trading at a discount, at par, or at a premium? Explain. (Select the best choice below.) O A. Because the yield to maturity is less than the coupon rate, the bond is trading at a premium. O B. Because the yield to maturity is less than the coupon rate, the bond is trading at a discount. O C. Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium. O D. Because the yield to maturity is greater than the coupon rate, the bond is trading at par. b. If the yield to maturity of the bond rises to 7.18% (APR with semiannual compounding), what price will the bond trade for? The new price of the bond is $ (Round to the nearest cent.)
Suppose a seven-year, $1,000 bond with a 7.8% coupon rate and semiannual coupons is trading with a yield to maturity of 6.29%. a. Is this bond currently trading at a discount, at par, or at a premium? Explain. b. If the yield to maturity of the bond rises to 7.18% (APR with semiannual compounding), what price will the bond trade for? a. Is this bond currently trading at a discount, at par, or at a premium? Explain. (Select the best choice below.) O A. Because the yield to maturity is less than the coupon rate, the bond is trading at a premium. O B. Because the yield to maturity is less than the coupon rate, the bond is trading at a discount. O C. Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium. O D. Because the yield to maturity is greater than the coupon rate, the bond is trading at par. b. If the yield to maturity of the bond rises to 7.18% (APR with semiannual compounding), what price will the bond trade for? The new price of the bond is $ (Round to the nearest cent.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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18. Suppose a seven-year,
$1,000 bond with a 7.8% coupon rate and semiannual coupons is trading with a yield to maturity of 6.29%.
a. Is this bond currently trading at a discount, at par, or at a premium? Explain.
b. If the yield to maturity of the bond rises to 7.18% (APR with semiannual compounding), what price will the bond trade for?
** round to the nearest cent**
Transcribed Image Text:1): Fir
Suppose a seven-year, $1,000 bond with a 7.8% coupon rate and semiannual coupons is trading with a yield to maturity of 6.29%.
a. Is this bond currently trading at a discount, at par, or at a premium? Explain.
b. If the yield to maturity of the bond rises to 7.18% (APR with semiannual compounding), what price will the bond trade for?
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a. Is this bond currently trading at a discount, at par, or at a premium? Explain. (Select the best choice below.)
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O A. Because the yield to maturity is less than the coupon rate, the bond is trading at a premium.
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O B. Because the yield to maturity is less than the coupon rate, the bond is trading at a discount.
O C. Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium.
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O D. Because the yield to maturity is greater than the coupon rate, the bond is trading at par.
for $ b. If the yield to maturity of the bond rises to 7.18% (APR with semiannual compounding), what price will the bond trade for?
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The new price of the bond is $ (Round to the nearest cent.)
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