Unformatted text preview: face value. The coupon rate is 7.5% and the bond is purchased to yield 8% convertible semi-annually. a. Before calculating the price, will this bond be sold at a discount or premium? b. Calculate the price c. Suppose the investor wants to sell the bond after 5 years and 4 months. At this time, the market interest rate (that buyers would desire) has dropped to 5% convertible semiannually. i. Calculate the dirty price of the bond ii. Calculate the clean price of the bond by each of the three methods in class: 1. Assume next coupon is shared in proportion 2. Assume straight line between book values 3. Assume an equivalent continuously paying coupon bond...
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- Fall '09