In 2014, the Treasury issued 30-year bond due in 2044 with a 'coupon' 2% and sell...
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In 2014, the Treasury issued 30-year bond due in 2044 with a 'coupon' 2% and sell at Par. 10 (Ten) years down the road, in 2024, interest rate has gone up and new Treasure bond are being issued with YTM at 4%. If investors could choose between a bond with 4% yield and 2% yield, they would always choose 4%. Q: At what price, investors have no difference between a bond issued in 2014 and a bond issued in 2024? In 2014, the Treasury issued 30-year bond due in 2044 with a 'coupon' 2% and sell at Par. 10 (Ten) years down the road, in 2024, interest rate has gone up and new Treasure bond are being issued with YTM at 4%. If investors could choose between a bond with 4% yield and 2% yield, they would always choose 4%. Q: At what price, investors have no difference between a bond issued in 2014 and a bond issued in 2024?
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Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780135811603
5th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Posted Date:
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