Homework Question Help (Finance)

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A bond with an annual coupon of $100 originally sold at par for $1000. The current yield on the maturity on this bond is 9%. Assuming no change in risk, this bond would sell at a ______ in order to compensate _________?

Jul 8th, 2015

Thank you for the opportunity to help you with your question!

The bond is supposed to sell at $ 1,111 as shown below:

100/0.09=$1,111 in orfdre to compensate the 1% drop  ( originally the coupon rate was 10% and at maturity 9%)

in short  let the let the bond be x dollars at a rate of 0.09 to give coupon rate of %100

hence x*0.09=$100

x=$(100/0.09)

x=$1,111

Please let me know if you need any clarification. I'm always happy to answer your questions.
Jul 8th, 2015

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