Question: You plan to raise an additional $200,000 to purchase this equipment by selling bonds. You issue two hundred $1,000 par value bonds maturing in 20

  1. You plan to raise an additional $200,000 to purchase this equipment by selling bonds. You issue two hundred $1,000 par value bonds maturing in 20 years at a coupon rate of 4% with semiannual coupon payments. The yield to maturity (YTM) on these bonds is 4% compounded semiannually when they are issued. What is the value of a bond at issue? What is the value of a bond in 5 years if the YTM increases to 10% compounded semiannually? Explain why bond prices change over time. Explain the difference between the quoted bond price and invoice price.

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