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Bond prices and yields Assume that the Financial Management Corporation's $ 1,000 -par-value bond has a 6.100 % coupon, matures on May 15, 2023, has...

Bond prices and yields   Assume that the Financial Management​ Corporation's ​$1,000​-par-value bond has a 6.100 % ​coupon, matures on May​ 15, 2023, has a current price quote of 96.391 and a yield to maturity​ (YTM) of 7.315%. Given this​ information, answer the following​ questions:

a.  What is the dollar price of the​ bond?

b.  What is the ​bond's current yield​?

c.  Is the bond selling at​ par, at a​ discount, or at a​ premium? ​ Why?

d.  Compare the​ bond's current yield calculated in part b to its YTM and explain why they differ.

a.  The dollar price of the bond is ​$___. ​(Round to the nearest​ cent.)

b.  The ​bond's current yield is_____​%. ​(Round to two decimal​ places.)

c.  The bond is selling at a discount / par/ a premium because its price is equal to/ greater than / less than the par value.  ​(Select from the​ drop-down menus.)

d.  Compare the​ bond's current yield calculated in part b to its YTM and explain why they differ. The yield to maturity is higher/ lower than the current yield because the former includes ​$36.09 in price depreciation / appreciation between today and the May​ 15, 2023 bond maturity.  ​(Select from the​ drop-down menus.)

Top Answer

A) Price of bonds in dollars = $ 963.91 B) Current yield... View the full answer

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