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Chapter 2 - LUTIONS TO PRACTICE QUESTIONS I Th pric fOI...

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LUTIONS TO PRACTICE QUESTIONS I .• Th pric fOI' ISHU A hould be a premium since the coupon rate is greater than the yield required by the market. 0, there is 11 '1'1'01' for Issue A. •The price Br Issue B hould be a discount since the coupon rate is less than the yield required by the market. So, there is no error for Issue B. • Issue C's coupon rate (0%) is less than the yield required by the market (5%). So, Issue C should be selling at a dis- count but the reported price is above par value. Hence, the reported price for Issue C is wrong. • Issue D's coupon rate (5.5%) is less than the yield required by the market (5.9%). So, Issue D should be selling at a discount but the reported price is above par value. Hence, the reported price for Issue D is wrong. •The price for Issue E should be par value since the coupon rate is equal to the yield required by the market. So, there is no error for Issue E. •Issue F's coupon rate (41f2%)is greater than the yield required by the market (4.0%). So, Issue F should be selling at a premium but the reported price is below par value. Hence, the reported price for Issue F is wrong.
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