Question

Consider a bond with a 6​% annual coupon and a face value of ​$900. Complete the...

Consider a bond with a

6​%

annual coupon and a face value of

​$900.

Complete the following table. ​(Enter your responses rounded to two decimal​ places.)

Years to Maturity

Yield to Maturity

Current Price

2

4​%

​?

2

6​%

​?

3

6​%

​?

5

4​%

​?

5

8​%

​?

When the yield to maturity is

less than

greater than

equal to

the coupon​ rate, the​ bond's current price is below its face value. For a given​ maturity, the​ bond's current price

rises

falls

does not change

as the yield to maturity rises. For a given yield to​ maturity, a​ bond's value

falls

rises

does not change

as its maturity increases. When the yield to maturity is

equal to

greater than

less than

the coupon​rate, a​ bond's current price equals its face value regardless of the number of years to maturity.

Homework Answers

Answer #1
Years to Maturity Yield to Maturity Current Price
2 4% ₹ 933.95
2 6% ₹ 900.00
3 6% ₹ 900.00
5 4% ₹ 980.13
5 8% ₹ 828.13

Formula,

=PV(4%,2,54,900,0) =$933.95

=PV(6%,2,54,900,0) =$900

= PV(6%,3,54,900,0) =$900

= PV(4%,5,54,900,0) = $980.13

= PV(8%,5,54,900,0) = $828.13

When the yield to maturity is greater than the coupon rate, thebond’s current price is below its face value.

For a given maturity, the bond’s current price falls as the yield to maturity rises

For a given yield tomaturity, a bond’s value rises as its maturity increases.

When the yield to maturity is equal to the coupon rate, a bond’s current price equals its face value regardless of the number of years to maturity.

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