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Is the bond selling at par at a discount or at a premium

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Reference no: EM131324702

Bond prices and yields Assume that the Financial Management Corporation's $1,000 par value bond has a 5.400% coupon, matures on May 15, 2023, has a current price quote of 112.721 and a yield to maturity (YTM) of 4.361%. Issue date is current in other words today.

Given this information, answer the following questions:

a. What is the dollar price of the bond?

b. What is the bond's current yield ?

c. Is the bond selling at par, at a discount, or at a premium? Why?

d. Compare the bond's current yield calculated in part b to its YTM and explain why they differ.

Responses

a. The dollar price of the bond is $_______ . (Round to the nearest cent.)

b. The bond's current yield is_________ %. (Round to two decimal places.)

c. The bond is selling at (1)________ because its price is (2)______ the par value. (Select from the dropdown menus.)

(1) a discount

     a premium

     par

(2) equal to

      less than

     greater than

d. Compare the bond's current yield calculated in part b to its YTM and explain why they differ.

The yield to maturity is (3) than the current yield because the former includes $127.21 in price

(4) between today and the May 15, 2023 bond maturity. (Select from the dropdown menus.)

(3) lower

     Higher

(4) appreciation

      Depreciation

Reference no: EM131324702

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