What is the yield on a corporate bond with a $1000face value purchased at a discount price of $875, ifit pays 6% fixed interest for the duration of thebond?yield = [?] %Give your answer as a percent rounded to the nearesthundredth.Hint: yield =interest paidprice paidEnter

Yield is the percentage representation that shows interest earned by the company n the total…

Answered: What is the yield on a corporate bond…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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a. An 8 ½%, 25-year, $1,000 bond is presently selling at a yield-to-maturity (YTM) of 9 4%. Assuming annual interest payments, what should you pay for the bond? b. What should you pay if interest is paid semiannually? c. Instead of a 25-year bond, they decide to issue 15-year bonds with annual payments. What should you pay for this bond if the YTM is 9 4%? Explain the differences in prices changes for (3a) and (3c) in terms of maturity. d. You buy an 8%, 15-year, $1,000 bond that pays interest annually when it is selling with a YTM of 7%. Immediately after you buy the bond, the YTM increases to 9%. What was the percentage change in the price of the bond? A bond has a market price that exceeds its face value. What type of bond is this? Describe the relationship between the coupon rate and the YTM. е.

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What is the yield on a corporate bond with a $1000 face value purchased at a discount price of $875, if it pays 6% fixed interest for the duration of the bond?