A bond of par value 1,000 pays a coupon of 4% p.a. annually for 20 years and the par value is 1,000 (coupon calculated on this number and not on maturity value). Calculate the following: The price of the bond and the current yield/ maturity of the bond is also 4%, if the 1. a. maturity value is: . $1,000 i. $950 b. Explain the answers as to the prices of the bonds as to why they are equal to, greater than or less than the par value in a. I. and a.i. Interest rates rise to 5% calculate the price of the bond in a i, and a. . d. Explain why the price of the bond has changed and the reason for directional move of the price of the bond. If the bond only had a maturity of 5 years and rates rose from 4% to 5%, would the price change be the same, bigger or smaller. Explain. C. e.
Online Tutoring, Online Tutors
