Question

Robert Aston wants to buy a bond that has a coupon rate of 5.5%. The yield...

Robert Aston wants to buy a bond that has a coupon rate of 5.5%. The yield to maturity for the bond is 6%. What is the purchase price going to be compared to the par value of the bond?

A) The bond will sell at par

B) The bond will sell at a premium

c) the bond will sell at a price set by auction

D)the bond will sell at a discount

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Option D is correct. the bond will sell at a discount

When YTM > Coupon, the value of the Bond will always be below par and;

When YTM < Coupon, the value of the Bond will always be above par and;

When YTM = Coupon, the value of the Bond will always be equal to Par.

Therfore Option D is correct as YTM > Coupon Rate.

NOTE: The answer to your question has been given below/above. If there is any query regarding the answer, please ask in the comment section. If you find the answer helpful, do upvote. Help us help you.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
a 20 year, 8% coupon rate, $1,000 par bond that pays interest semi-annually bought five years...
a 20 year, 8% coupon rate, $1,000 par bond that pays interest semi-annually bought five years ago for $850. this bond is currently sold for 950. what is the yield on this bond? a.12.23% b.11.75% c.12.13% d.11.23% an increase in interest rates will lead to an increase in the value of outstanding bonds. a. true b. false a bond will sell ____ when coupon rate is less than yield to maturity, ______ when coupon rate exceeds yield to maturity, and...
1. A Treasury bond has a 10% annual coupon and a 10.5% yield to maturity. Which...
1. A Treasury bond has a 10% annual coupon and a 10.5% yield to maturity. Which of the following statements is CORRECT? * a. The bond sells at a price below par. b. The bond has a current yield less than 10%. c. The bond sells at a discount. d. a & c. e. None of the above 2. J&J Company's bonds mature in 10 years, have a par value of $1,000, and make an annual coupon interest payment of...
New homes has a bond issue with the coupon rate of 5.5% that matures in 8.5...
New homes has a bond issue with the coupon rate of 5.5% that matures in 8.5 years the bonds have a par value of 1000 in the market price of 1022 interest is paid semiannually what is the yield to maturity
Suppose a​ seven-year, $1,000 bond with a 7.6% coupon rate and semiannual coupons is trading with...
Suppose a​ seven-year, $1,000 bond with a 7.6% coupon rate and semiannual coupons is trading with a yield to maturity of 6.54%. a. Is this bond currently trading at a​ discount, at​ par, or at a​ premium? Explain. b. If the yield to maturity of the bond rises to 7.33% (APR with semiannual​ compounding), what price will the bond trade​ for? a. Is this bond currently trading at a​ discount, at​ par, or at a​ premium? Explain.  ​(Select the best...
An investor buys a bond that has a 5-year life, an annual coupon rate of 5.5%,...
An investor buys a bond that has a 5-year life, an annual coupon rate of 5.5%, and is currently trading at a Yield to Maturity of 5.5%. The coupons are paid semi-annually, and the bond has a par value of $1,000. After holding the bond for 1-year, the bonds Yield to Maturity has decreased from 5.5% to 4.0%. Assume that the investor has received a full year of coupon payments. What is this investors Rate of Return from this investment?...
1. A 3-year annual coupon bond has a yield to maturity of 8%, coupon rate of...
1. A 3-year annual coupon bond has a yield to maturity of 8%, coupon rate of 5%. The face value of the bond is $1,000. a. What is the price of the bond? Is it premium bond or discount bond? b. Suppose one year later immediately after you receive the first coupon payment, the yield to maturity drops to 7%. What would be your holding period return if you decide to sell the bond at the market price then? c....
Robert Smith just purchased a 10-year bond for $944. The bond has a coupon rate of...
Robert Smith just purchased a 10-year bond for $944. The bond has a coupon rate of 8% and pays coupons semiannually. Robert does not intend to hold the bond until maturity, instead, he plans to sell the bond in exactly 5 years. What is the price Robert can sell the bond for at this time?
Your broker offers you the opportunity to purchase a bond with coupon payments of $90 per...
Your broker offers you the opportunity to purchase a bond with coupon payments of $90 per year and a face value of $1,000. If the yield to maturity on similar bonds is 8%, this bond should: A) Sell for the same price as the similar bond regardless of their respective maturities. B) Sell at a premium. C) Sell at a discount. D) Sell for either a premium or a discount but it's impossible to tell which. E) Sell for par...
Suppose a​ seven-year, $1,000 bond with a 9.43%coupon rate and semiannual coupons is trading with a...
Suppose a​ seven-year, $1,000 bond with a 9.43%coupon rate and semiannual coupons is trading with a yield to maturity of 6.87%. a. Is this bond currently trading at a​ discount, at​ par, or at a​ premuim? Explain. The bond is currently trading...  ​(Select the best choice​ below.) A. ... at a premium because the yield to maturity is greater than the coupon rate. B... at par because the coupon rate is equal to the yield to maturity C... at a...
1. A bond issued by ABC Corp. has a face value of $1,000, coupon rate of...
1. A bond issued by ABC Corp. has a face value of $1,000, coupon rate of 6%, price of $1,029.13 and time to maturity of one year. (PLEASE SHOW ALL WORK) a. What is its current yield? b. What is its yield to maturity? c. Is this a discount, premium or par bond? Why? d. Now suppose instead of having one year to maturity, it has two year to maturity and is priced $1,057.40. What is the current yield and...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT