Question: Consider the following two bonds: Bond A Bond B Face value $1,000 $1,000 Coupon rate (annual) 8% 8% YTM 9% 7% Maturity 10 years 10

Consider the following two bonds:

	Bond A	Bond B
Face value	$1,000	$1,000
Coupon rate (annual)	8%	8%
YTM	9%	7%
Maturity	10 years	10 years

Calculate the price for each bond. What is the primary factor affecting the prices of the bonds? Indicate which bond is premium and which one is discount. Is there any relationship between the YTM and the coupon rate in case of premium/discount bonds?

Now, consider the following two bonds:

	Bond X	Bond Y
Face value	$1,000	$1,000
Coupon rate (annual)	8%	8%
YTM	11%	11%
Maturity	5 years	10 years

Calculate the price for each bond. What is the relationship between bond price and maturity, all else equal?

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