A company just issued a bond that will pay the bearer $200,000 in fifteen years. As this is a bearer instrument, there are no interim interest or coupon payments. a. If 5,000 of these bonds were sold today and priced to yield 5.5% p.a., how much would the company receive today? Ignore any commission or underwriter spreads that may be charged. Priced to yield means that if you buy the bond today and hold it for 15 years, you will get an annualized 5.5% return on your investment over the 15 year period. b. Assuming five years later, these bonds were priced to yield 7.2%, what would one of these bonds sell for (face value $200,000) at that time? (Hint, this is now a 10 year bond)

Answer rating: 100% (QA)

a To calculate how much the company would receive today we need to find the present value of the bon... View the full answer