Consider a 30 year $10,000 (risk-free) bond with annual coupon rate of 4.25%.
(a) What is the annual coupon payment?
(b) If the yield to maturity on the bond is 4%, what must be the market price for the bond? Is the bond selling at a discount of (below) or a premium of (above) face value?
(c) If the yield to maturity on the bond is 6%, what must be the market price for the bond? Is the bond selling at a discount of (below) or a premium of (above) face value?