Question

sara is a recent retiree who is interested in investing some of her savings in corporate bonds. Her financial planner has suggested the following bonds:

1-Bond A has a 6% annual coupon, matures in 10 years, and has a $1,000 face value.

2- Bond B has a 8% annual coupon, matures in 10 years, and has a $1,000 face value.

3-Bond C has an 10% annual coupon, matures in 10 years, and has a $1,000 face value.

Each bond has a yield to maturity of 8%.

a) Calculate the value today of each of the three bonds.

b) If the yield to maturity for each bond remains at 8%, what will be the price of each bond 2 years from now?

Answer 1

Solution:-

a. To Calculate Value of bond today-

B. To Calculate price of each bond 2 years from now-

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