Look again at Table. Suppose that spot interest rates all change to 4%a flat term structure of
Question:
Look again at Table. Suppose that spot interest rates all change to 4%—a “flat†term structure of interest rates.
a. What is the new yield to maturity for each bond in the table?
b. Recalculate the price of bondA.
Transcribed Image Text:
Year ( Bond Price Yield to (PV) Maturity (V, %) 035 042 044 Discount factors 9246 8839 8418 Bond A (8% coupon): Payment (C 1,080 998.52 $1,075.82 3.98 Bond B (11% coupon): Payment (C) 1,110 $106.28 981.11 $1,189.10 Bond C (6% coupon): Payment (C) 1,060 55.47 53.03 892.29 $1,058.76 4.37 Bond D (strip) Payment (C $1,000 S841.78 4.40
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Year 1 2 3 4 Bond Price YTM Spot rate 4 4 4 4 Discount factor 096154 092456 08...View the full answer
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Related Book For
Principles of Corporate Finance
ISBN: 978-0077404895
10th Edition
Authors: Richard A. Brealey, Stewart C. Myers, Franklin Allen
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