Problem $13-01$

A $$1,000$ bond has a coupon of $5$ percent and matures after eight years. Assume that the bond pays interest annually.

a$.$ What would be the bond's price if comparable debt yields $8$ percent? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar.

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b$.$ What would be the price if comparable debt yields $8$ percent and the bond matures after four years? Use Appendix B and Appendix D to answer the question. Round your answer to the nearest dollar.

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c$.$ Why are the prices different in a and $b?$

The price of the bond in $a$ is than the price of the bond in $b$ as the principal payment of the bond in $a$ is than the principal payment of the bond in $b($in time$).$

d$.$ What are the current yields and the yields to maturity in a and $b?$ Round your answers to two decimal places.

The bond matures after eight years:

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