Suppose a 28-year, $100,000 par value bond with an annual fixed 3.75% coupon rate (coupons paid semiannually,
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Question:
Suppose a 28-year, $100,000 par value bond with an annual fixed 3.75% coupon rate (coupons paid semiannually, as are most bonds) is trading for a price of $104,439.24.
a. What is the bond’s yield to maturity or YTM (expressed as an APR with semiannual compounding)?
b. If this bond’s yield to maturity or YTM changes to 4.0% APR, what will be the bond’s new price? What is this bond’s new price if the YTM changes to 3.75%?
Expert Answer:
a To calculate the bonds yield to maturity YTM we can use the present value formula and solve for th... View the full answer
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