A firm issued 10-year original maturity bonds one year ago. Thebond makes semiannual coupon payments and its par value is $1,000.Answer the following questions.
(a) If the current YTM is 6% and the bonds currently sellfor $1,055, what must be the annual coupon rate on the bonds?
(b) Suppose that its YTM goes up to 8% after one year (i.e.:number of years to maturity = 8). What would the price of the bondsbe after one year? Use the coupon rate you calculated in (a).
(c) Suppose that the bond price goes down to $900 two years fromnow (i.e.: number of years to maturity = 7). What would the YTM forthe bond be after two years? Use the coupon rate you calculated in(a)
A firm issued 10-year original maturity bonds one year ago. The bond makes semiannual coupon payments and its par value
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