The concept of compound interest refers

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Reference no: EM131984837

1. The concept of compound interest refers to:

a) earning interest only on the original investment

b) payment of interest on previously paid interest

c) investing for a multi-year period of time

d) changing interest rates during an investment period.

2. Bond A: 10% coupon, 10-year term, $1000 face value

Bond B: 10% coupon, 50-year term, $1000 face value

1) Both bonds trade at $1000. Calculate the YTM for Bond A and Bond B.

2) Both bonds trades at $1200. Calculate the YTM for Bond A and Bond B.

3) Both bonds trade at $800. Calculate the YTM for Bond A and Bond B.

4) Tell me what happens to percentage change in price for the bonds:

a. When prices increases.

b. When price decreases.

Reference no: EM131984837

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