Consider a bond issued by MGM Inc. exactly two years ago. At that time the bond’s time to maturity was 30 years. The bon
Posted: Thu May 19, 2022 2:37 pm
Consider a bond issued by MGM Inc. exactly two years ago. At
that time the bond’s time to maturity was 30 years. The bond pays
semiannual coupons with the coupon rate of 6% per year. The face
value of the bond is $1000.
What is the bond’s price today, if today’s market interest rate
for bonds of comparable maturity and default risk is 8% per year?
(5pts)
You would like to speculate and believe that tomorrow the market
interest rate for comparable bonds would decrease to 5%, would you
buy or sell short this bond today? (3pts)
Suppose that exactly two years from today the price of the bond
will be $900, what is the annual YTM at that time? (6pts)
that time the bond’s time to maturity was 30 years. The bond pays
semiannual coupons with the coupon rate of 6% per year. The face
value of the bond is $1000.
What is the bond’s price today, if today’s market interest rate
for bonds of comparable maturity and default risk is 8% per year?
(5pts)
You would like to speculate and believe that tomorrow the market
interest rate for comparable bonds would decrease to 5%, would you
buy or sell short this bond today? (3pts)
Suppose that exactly two years from today the price of the bond
will be $900, what is the annual YTM at that time? (6pts)