Suppose you want to know the price of a 10-year 7% coupon Treasury bond that pays...

 

Transcribed Image Text:

Suppose you want to know the price of a 10-year 7% coupon Treasury bond that pays interest annually. a. You have been told that the yield to maturity is 8%. What is the price (per $100 of face value)? b. What is the price if coupons are paid semiannually, and the yield to maturity is 8% per year? c. Now you have been told that the yield to maturity is 7% per year. What is the price? Could you have guessed the answer without calculating it? What if coupons are paid semiannually? Suppose you want to know the price of a 10-year 7% coupon Treasury bond that pays interest annually. a. You have been told that the yield to maturity is 8%. What is the price (per $100 of face value)? b. What is the price if coupons are paid semiannually, and the yield to maturity is 8% per year? c. Now you have been told that the yield to maturity is 7% per year. What is the price? Could you have guessed the answer without calculating it? What if coupons are paid semiannually?

Answer rating: 100% (QA)

a To calculate the price of the bond per 100 of face value when the yield to maturity is 8 we can us... View the full answer