A $1 ,000 par value bond has a 6 percent coupon, which is paid on a semiannual

Question:

A $1 ,000 par value bond has a 6 percent coupon, which is paid on a semiannual basis. It matures in either 1 year or 20 years. Current yields on similar bonds are either 4 percent or 8 percent.
a. Calculate the price of the bond for the four possibilities.
b. What is the relationship between price and yield?
c. What is the relationship between bond price changes and time to maturity?

Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...

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