What is current yield of the bond at that price

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Reference no: EM131891632

A 20-year Bond was issued at par value of $1000 with a 7.5% per year coupon rate. Coupon interest payments are made semi-annually. Two years after issuance, the Bond sold for $965.

A. What should the market price of the bond be four years after issuance if the current market interest rate for comparably rated bonds is 12% per year compounded semi-annually? (Assume the seller recieves the coupon payment at the end of four years before the sale)

B. Six years after issuance the bond sells for $1060. What is the current yield of the bond at that price and time in terms of rate per 1/2 year (6 months) AND efective rate per year?

Reference no: EM131891632

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