An investor is interested in buying a corporate bond with a face value of $1000,single AA rating, and a 5yr maturity the bond has an annual coupon of 4.00% payable semi annually . Interest rate is 0.80% as of today. (a) what is the current price of the bond. (b) Two years later, the investor checked CNBC.com and noticed that the yield to maturity on the bond increased while the bond price decreased from the time of of purchase. Explain two reasons that this could have happened

Answer rating: 100% (QA)

To calculate the current price of the bond we can use the present value formula for a bonds cash flo... View the full answer