Explain how market yield affects the price of a bond. Could you price a bond without knowing its market yield? Explain.
Answer to relevant QuestionsWhy are bonds generally priced using semiannual compounding? Does it make much difference if you use annual compounding? Briefly explain what will happen to a bond’s duration measure if each of the following events occur. a. The yield to maturity on the bond falls from 8.5% to 8%. b. The bond gets 1 year closer to its maturity. c. Market ...Compute the current yield of a 10%, 25-year bond that is currently priced in the market at $1,200. Use annual compounding to find the promised yield on this bond. Repeat the promised yield calculation, but this time use ...Assume that an investor pays $800 for a long-term bond that carries an 8% coupon. In 3 years, he hopes to sell the issue for $950. If his expectations come true, what yield will this investor realize? (Use annual ...A 15-year bond has an annual-pay coupon of 7.5% and is priced to yield 9%. Calculate the price per $1,000 par value.
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