The Zeniba Corp. has bonds outstanding that mature 20 years from today. The bonds have a fixed coupon = 6.25%, pay interest semiannually, and have a face value = $1,000.00. Today investors require an average annual rate of return on 20 year loans to Zeniba (i.e., a yield to maturity) = 7.3%

a) What do you believe, to the nearest penny, is today’s price per bond?

b) Suppose the annual return required by investors on 20 year loans to Zeniba suddenly rises to 8%. What do you believe will be the percentage point change in the price per bond?

Answer rating: 100% (QA)

a To calculate the price per bond we can use the present value formula for a bond PV C 1 1 r2n2 r2 F... View the full answer