Explain how a bond’s interest rate can change over time even if interest rates in the economy do not change.
Answer to relevant QuestionsWhat is the yield to call and why is it important to a bond investor? Compute the price of a 3.8 percent coupon bond with 15 years left to maturity and a market interest rate of 6.8 percent. (Assume interest payments are semiannual.) Is this a discount or premium bond?A client in the 28 percent marginal tax bracket is comparing a municipal bond that offers a 4.5 percent yield to maturity and a similar-risk corporate bond that offers a 6.45 percent yield. Which bond will give the client ...A corporate bond with a 6.75 percent coupon has 10 years left to maturity. It has had a credit rating of BB and a yield to maturity of 8.2 percent. The firm has recently become more financially stable and the rating agency ...What is the taxable equivalent yield on a municipal bond with a yield to maturity of 2.9 percent for an investor in the 28 percent marginal tax bracket?
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