Homework Question Help (Finance)

Business & Finance
Tutor: None Selected Time limit: 1 Day

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

Studypool's Notebank makes it easy to buy and sell old notes, study guides, reviews, etc.
Click to visit
The Notebank
...
Jul 8th, 2015
...
Jul 8th, 2015
Dec 10th, 2016
check_circle
Mark as Final Answer
check_circle
Unmark as Final Answer
check_circle
Final Answer

Secure Information

Content will be erased after question is completed.

check_circle
Final Answer