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QUESTION
Jason Greg is a recent retiree who is interested in investing some of his savings in corporate bonds. Listed below are the bonds he is considering...
Jason Greg is a recent retiree who is interested in investing some of his savings in corporate bonds. Listed below are the bonds he is considering adding to his portfolio.
- Bond A has a 7.5% semiannual coupon, matures in 12 years, and has a $1,000 face value.
- Bond B has a 10% semiannual coupon, matures in 12 years, and has a $1,000 face value.
- Bond C has an 11.5% semiannual coupon, matures in 12 years, and has a $1,000 face value.
Each bond has a YTM of 10%.
a. Before calculating the prices of the bonds, indicate whether each bond is trading at a premium, discount or par.
b. Calculate the price of each of these bonds.
c. Calculate the current yield for each bond.
