5) A 6-year 7.2% annual coupon bond is selling to yield 6.5%. The bond pays interest annually. The par value of the bond is $100. a. What is the price of the 6-year 7.2% coupon bond selling to yield 6.5%? b. What is the price of this bond one year later assuming the yield is unchanged at 6.5%? c. Suppose that one year later the yield of the bond decreases to 6.3%. What is the price change attributable to moving to maturity assuming no change in the discount rate? What is the price change attributable to a decrease in the discount rate from 6.5% to 6.3%? What is the total price change?

5) A 6-year 7.2% annual coupon bond is selling to yield 6.5%. The bond pays interest annually. The par value of the bond is $100. a. What is the price of the 6-year 7.2% coupon bond selling to yield 6.5%? b. What is the price of this bond one year later assuming the yield is unchanged at 6.5%? c. Suppose that one year later the yield of the bond decreases to 6.3%. What is the price change attributable to moving to maturity assuming no change in the discount rate? What is the price change attributable to a decrease in the discount rate from 6.5% to 6.3%? What is the total price change?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 11P

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