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03 Bond valuation answers - Bond Question 1 Bond Question 2...

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1 15 Bond Question 1 Consider 20-year bond paying semi-annual coupons Coupon rate: 10.5% YTM: 12.0% How much would you pay for this bond? ( ) ( ) 15 887 06 0 1 000 1 06 0 1 1 1 06 0 1 5 . 52 $ 40 40 0 . $ . , $ . . P = + + + = 16 Bond Question 2 $1000 face value bond with r C = 12% P 0 = $1195 Is the discount rate ( YTM ) greater than, less than or equal to the coupon rate? r C > YTM (selling at a premium) 17 Bond Question 3 Consider bonds A and B Both are 10 year bonds Bond A has a 4% annual coupon and Bond B has a 10% annual coupon If the discount rate is 10%, what is the price of
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