Consider a 12 percent (annual) coupon bond that matures in 3 years, has a par value of

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Consider a 12 percent (annual) coupon bond that matures in 3 years, has a par value of 1000, and pays coupon semiannually. Suppose that currently this bond is available in the market for 1000. Suppose that your investment horizon is 1 year and you expect that the market yield to maturity of this type of bond will decrease to 7.5% in 1 year from now.

a) Find, what will be the value of this bond in 1 year from now considering the expectations outlined.

b) Calculate the horizon yield from this bond considering the investment horizon and the expectations outlined.

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Introduction To Corporate Finance

ISBN: 9781118300763

3rd Edition

Authors: Laurence Booth, Sean Cleary

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Posted Date: May 08, 2024 09:07 AM

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Consider a 12 percent (annual) coupon bond that matures in 3 years, has a par value of

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a To find the value of the bond in 1 year from now we can use the concept of bond pricing and discou... View the full answer

Introduction To Corporate Finance

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