1. On 15 August 2023, 3M corporation 4.25% bonds maturing on 15 February 2026 were trading at $100.25 per $100 face value.  These bonds pay semi-annual coupons of 4.25%/2, on 15 February 2024, 15 August 2024, 15 February 2025, 15 August 2025, and 15 February 2026. 

 

1. Please compute the yield-to-maturity, assuming compounding two times per year.  

 If the yield-to-maturity increases to 5% per year, what will be the new price of the bond?  What if the yield increases to 8% per year?

Answer rating: 100% (QA)

SOLUTION First lets calculate the yieldtomaturity YTM of the bond based on the given information The YTM is the total return of the bond including bot... View the full answer