Question: (5) Consider two bonds; A and B. Both bonds will mature in 10 years. Both bonds have a face value of 1000 . Bond A

 (5) Consider two bonds; A and B. Both bonds will mature

(5) Consider two bonds; A and B. Both bonds will mature in 10 years. Both bonds have a face value of 1000 . Bond A pay coupons annually at a rate of 3.5% and bond B pays coupons at an annual rate of 5%. Bond A is redeemable at par and the redemption value of bond B is X. The price of bond A at t=0 is 10% less than the price of bond B and time t=1. If both have the same annual effective yield rate of 2%, find X. (6) John purchased a 10-year 1000-par bond that pays annual coupons at a rate of r. This bond is redeemable at par and was priced at a yield of 4%. After 4 years, John sells the bond to Jane. Jane pays a price that earns her an effective yield of 3%. John actually earned an effective yield of 6.6% over the first 4 years. Find r. (5) Consider two bonds; A and B. Both bonds will mature in 10 years. Both bonds have a face value of 1000 . Bond A pay coupons annually at a rate of 3.5% and bond B pays coupons at an annual rate of 5%. Bond A is redeemable at par and the redemption value of bond B is X. The price of bond A at t=0 is 10% less than the price of bond B and time t=1. If both have the same annual effective yield rate of 2%, find X. (6) John purchased a 10-year 1000-par bond that pays annual coupons at a rate of r. This bond is redeemable at par and was priced at a yield of 4%. After 4 years, John sells the bond to Jane. Jane pays a price that earns her an effective yield of 3%. John actually earned an effective yield of 6.6% over the first 4 years. Find r

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