Suppose a seven-year, $1000 bond with an 8% coupon rate and semiannual coupons is trading with a

Question:

Suppose a seven-year, $1000 bond with an 8% rate and semiannual coupons is trading with a yield to of 6.75%.
a. Is this bond currently trading at a discount, at par, or at a premium? Explain.
b. If the yield to of the bond rises to 7.00% (APR with semiannual compounding), what price will the bond trade for? Suppose that General Motors Acceptance issued a bond with ten years until a of $1000, and a rate of 7% (annual payments). The yield to on this bond when it was issued was 6%. Use this information for Problems 16–18.

Corporation
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A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the... Maturity
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