Bravo, Inc., just issued a corporate bond in this same environment. Since Bravo's credit risk is...

Transcribed Image Text:

Bravo, Inc., just issued a corporate bond in this same environment. Since Bravo's credit risk is lower, they were able to offer bonds with a 4.5% coupon (again, paid semi-annually) with a 20 year maturity at par of $1000. If (after these bonds are issued) interest rates increase, so that the yield-to-maturity increases by 1% per year, What is the price of the new Bravo bonds after the increase in YTM? Bravo, Inc., just issued a corporate bond in this same environment. Since Bravo's credit risk is lower, they were able to offer bonds with a 4.5% coupon (again, paid semi-annually) with a 20 year maturity at par of $1000. If (after these bonds are issued) interest rates increase, so that the yield-to-maturity increases by 1% per year, What is the price of the new Bravo bonds after the increase in YTM?

Answer rating: 100% (QA)

The price of a bond is inversely related to the yieldtomaturity YTM When interest rates increase th... View the full answer