XYZ Inc. issued a 10-year bond with a par value of $1,000 and a coupon rate of 8%. The bond was issued 4 year ago. Every year, bond holders receive $40.00 on June 30 and December 31. Your yield is 10%. Required: How much would you pay for the bond on Day 1 of Year 5? How much would you pay for the bond on Day 1 of Year 5 if your yield were 6%? Under what circumstance, if any, would you agree to pay $1,000 for the bond? Why?
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XYZ Inc. issued a 10-year bond with a par value of $1,000 and a coupon rate of 8%.
The bond was issued 4 year ago.
Every year, bond holders receive $40.00 on June 30 and December 31.
Your yield is 10%.
Required:
How much would you pay for the bond on Day 1 of Year 5?
How much would you pay for the bond on Day 1 of Year 5 if your yield were 6%?
Under what circumstance, if any, would you agree to pay $1,000 for the bond? Why?
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