help in homework

New User?

Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / A large industry bond carries a coupon rate of 7% and has a face value of $1000

A large industry bond carries a coupon rate of 7% and has a face value of $1000

Finance

A large industry bond carries a coupon rate of 7% and has a face value of $1000. The bond has 12 years until maturity and sells at a yield to maturity of 6%.

a) What interest payments do the bondholders receive each year?

b) At what price does the bond sell assuming annual interest payment?

c) What will happen to the bond price if the yield to maturity falls to 3%?

pur-new-sol

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE

Answer Preview

1.
Annual interest payment=Par value*Coupon rate
=1000*7%=70

2.
Price=Par value*Coupon rate/yield*(1-1/(1+yield)^n)+Par value/(1+yield)^n
=1000*7%/6%*(1-1/1.06^12)+1000/1.06^12=1083.83843940383

3.
=1000*7%/3%*(1-1/1.03^12)+1000/1.03^12=1398.1601597427

Sitejabber (5.0)

BBC (5.0)

Trustpilot (4.9)

Google (5.0)