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Another bond with similar risk and maturity

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Reference no: EM131702582

A 20-year corporate bond has a par value of $2000 and a 7.5% annual coupon rate. Assume that your required rate of return is 10% and that you plan to hold onto this bond for 6 years. You and the market have expectations that in 6 years the yield-to-maturity for this bond (or another bond with similar risk and maturity) will be 9%. How much are you willing to pay for this bond today? (Hint: You will need to know how much you can sell the bond for at the end of 6 years. Then you must use this value to determine how much you would be willing to pay for it today! So, Step 1 is to find the value of the bond in 6 years -> N=14,...)

Reference no: EM131702582

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