If interest rates dont change what should the price of


You are looking at two different bonds:

                         X                                       Y

Type:          premium bond                 discount bond

Coupon:                9%                          7%

YTM:                    7%                           9%

Maturity              13 years                13 years

(a) What is the price of each bond today?

(b) If interest rates don't change, what should the price of these bonds be in 1, 3, 8, 12 and 13 years from now? Assume you are computing the prices right after the coupons are paid.

(c) Given the results you found above, what happens to the price of a bond as it approaches maturity?

Request for Solution File

Ask an Expert for Answer!!
Financial Management: If interest rates dont change what should the price of
Reference No:- TGS02765627

Expected delivery within 24 Hours