You manage an investment portfolio and are considering a 10-year bond with a face value of $1,000 that, according to the

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answerhappygod
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You manage an investment portfolio and are considering a 10-year bond with a face value of $1,000 that, according to the

Post by answerhappygod »

You manage an investment portfolio and are considering a 10-year
bond with a face value of $1,000 that, according to the prospectus,
you can purchase on February 1, 2024 when it is initially
issued. The bond is designed to provide a 6.1%
yield-to-market (YTM) and makes annual February 1 coupon
payments. The underwriter has stated the issuer’s intention
to sell the bonds at face value (par) and your plan is purchase the
bonds at issuance for $1,000 apiece, meaning the YTM will equal the
coupon rate on the date of sale.
If the YTM is expected to remain constant, what is the
minimum price you would accept to sell the bond on January 31,
2026, the day before you receive the 2nd coupon
payment?
A) $1,183.00
B) $1,059.00
C) $1,000.00
D) $1,061.00
E) $1,053.00
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