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Ryngart recently issued 15 year bonds. They have a par value of $1,000 and an annual...

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?

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Homework Answers

Answer #1

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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