Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
Consider a 5-year bond with a 3% coupon that has a present yield to maturity of 8%
Consider a 5-year bond with a 3% coupon that has a present yield to maturity of 8%. If interest rates remain constant, one year from now, the price of this bond will be
Group of answer choices
A. $1,000
B. lower
C. the same
D. higher
Expert Solution
D. Higher
Whe yield to maturity is lower than coupon rate, bond willa alway sell at a discount. That is, price will be lower tahn face value of $1.000. As time to maturity declines, price of the bond will move towards face value if interest rate are constant. Therefore, a bond which was trading at a discount will have a higher value next year because the pricw will move towards its face value.
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
