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Rick bought a 25 year bond when it was issued 15 years ago. The bond has a face value of 1000 and a coupon rate equal to 9 % and the coupon is paid every 6 months. If the yield on similar risk investm
Rick bought a 25 year bond when it was issued 15 years ago. The bond has a face value of 1000 and a coupon rate equal to 9 % and the coupon is paid every 6 months. If the yield on similar risk investments is 7% A. What is the current market value (price) if he bond? B. Suppose interest rates level rise to the point where such bonds now yield 11%. What would be the price of the bond? C. What price would bonds sell if the yield on them was 6%? D.What do you observe regarding the relationship between interest rate (ytm) and bond price? E. What do you observe regarding the relationship between coupon, ytm, and the bond price?
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