Question

Miller Corporation has a premium bond making semiannual payments. The bond pays a coupon of 7 percent, has a YTM of 5 percent, and has 17 years to maturity. The Modigliani Company has a discount bond making semiannual payments. This bond pays a coupon of 5 percent, has a YTM of 7 percent, and also has 17 years to maturity. Both bonds have a par value of $1,000. What is the price of each bond today? If interest rates remain unchanged, what do you expect the price of these bonds to be 1 year from now? In 7 years? In 12 years? In 16 years? In 17 years? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Answer 1