Ryngart recently issued 15 year bonds. They have a par value of $1,000 and an annual coupon of 5.7%. Current market rates are 7%. In the space below answer a, b, & c:
a) Should the bond trade at a premium of a discount to par value?
b) What annual $ amount of interest would an investor in one of
these bonds receive?
c) How much should an investor be willing to pay for the bond?
a)
Market rate is higher than coupon rate, Bond will sell at discount.
b)
Annual coupon:
= $1,000*5.7%
= $57
c)
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