Question: Finance 850 Problem Set #4 Valuing Bonds (25 points) 1. Suppose a 26-year, $100,000 par value bond with an annual fixed 4.5% coupon rate (coupons

Finance 850 Problem Set #4 Valuing Bonds (25 points)

1. Suppose a 26-year, $100,000 par value bond with an annual fixed 4.5% coupon rate (coupons paid semiannually, as are most bonds) is trading for a price of $108,036.24.

a. What is the bonds yield to maturity or YTM (expressed as an APR with semiannual compounding)?

b. If this bonds yield to maturity or YTM changes to 4.25% APR, what will be the bonds new price? What is this bonds new price if the YTM changes to 4.50%?

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