Show all calculations. Face value = $1,000.
1. A corporate bond A maturing in 20 years has a 6% coupon rate. It is selling at face value.
A) What is its yield to maturity.
B) A similar corporate bond B maturing in 20 years has a 4% coupon rate. At what price should this bond sell if the yield to maturity is the same for both bonds?
C) Because of suddent changes in the risk of htese bonds, the required rate of reutn goes down to 5%. What are the prices of both bnods?
D) What are the percentages changes in each price?