# 8. (a) A 3-year bond (maturing on 1/1/2023) with a par value of $1000 makes semiannual...
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# 8.
(a) A 3-year bond (maturing on 1/1/2023) with a par value of $1000 makes semiannual payments at a coupon rate of 4%.
Calculate its price if the YTM is 5.1%.
(b)Assume that the above bond has a special feature where its coupon is reset based on the underlying 30-year bond rates. If the 30-year bond rate exceeds 3%, then the above bond will increase its coupon by 1%. Assume that on 1/1/2022, the 30-year bond rate crosses 3%. Re-calculate the price of the bond as of 1/1/2022. Assume the YTM changes to 5.5%.
Related Book For
Introduction To Corporate Finance
ISBN: 9781118300763
3rd Edition
Authors: Laurence Booth, Sean Cleary
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