Question: ABC Corp. has a $3,000 par value bond outstanding with a coupon rate of 8 percent paid quarterly and 10 years to maturity. The yield

ABC Corp. has a $3,000 par value bond outstanding with a coupon rate of 8 percent paid quarterly and 10 years to maturity. The yield to maturity of the bond is 4 percent.

a) What is the dollar price of the bond now?

b) If the bond dollar value drops to $3,000 after three years (t=3), what is the yield to maturity then? [Hint: explain in one sentence] - why is b 8% and how to work it out?

ABC Corp. has a $3,000 par value bond outstanding with a coupon

a) Par = 3000 C = 3,000 * 0.08 = 240 YTM-40% Face YTM/4(1YTM/4)10x4)(1 YTM/4)10x4 (1+1%)10x4) + 196)10x4 = 3985.04 1 % b) YTM is 8% because face value is equal to bond value

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