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Bond Prices versus Yields
a. What is the relationship between the price of a bond and its YTM?
b. Explain why some bonds sell at a premium over par value while other bonds sell at a discount. What do you know about the relationship between the coupon rate and the YTM for premium bonds? What about for discount bonds? For bonds selling at par value?
c. What is the relationship between the current yield and YTM for premium bonds? For discount bonds? For bonds selling at par value?
Interest Rate Risk All else being the same, which has more interest rate risk, a long-term bond or a short-term bond? What about a low coupon bond compared to a high coupon
Coupon Rates Hollin Corporation has bonds on the market with 13.5 years to maturity, a YTM of 7.3 percent, and a current price of $1,080. The bonds make semiannual payments.
Bond Yields A Japanese company has a bond outstanding that sells for 87 percent of its ¥100,000 par value. The bond has a coupon rate of 4.3 percent paid annually and mature
Calculating Real Rates of Return If Treasury bills are currently paying 4.7 percent and the inflation rate is 2.3 percent, what is the approximate real rate of interest? The
what is the percentage change in the price of these bonds? What if interest rates suddenly fall by 2 percent instead? What does this problem tell you about the interest rate
Bond Yields Mega Software has 7.4 percent coupon bonds on the market with 9 years to maturity. The bonds make semiannual payments and currently sell for 105 percent of par.
Accrued Interest You purchase a bond with an invoice price of $850. The bond has a coupon rate of 7.6 percent, and there are 2 months to the next semiannual coupon date. Wha
Accrued Interest You purchase a bond with a coupon rate of 9.9 percent and a clean price of $1,060. If the next semiannual coupon payment is due in four months, what is the
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