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Par value and market value of a bond

Each of the bonds shown in the following table pays interest annually.

Bond A $1,000    Coupon interest rate 9%   Years to maturity 8      Current Value $820
Bond B $1,000    Coupon interest rate 12%    Years to maturity 16    Current Value $1,000
Bond C $500       Coupon interest rate 12%    Years to maturity 12    Current Value $560
Bond D $1,000    Coupon interest rate 15%    Years to maturity 10    Current Value $1,120
Bond E $1,000     Coupon interest rate 5%      Years to maturity 3     Current Value $900

Q1. Calculate the yield to maturity (YTM) for each bond.

Q2. What relationship exists between the coupon interest rate and yield to maturity and the par value and market value of a bond? Explain.

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Solution Preview :

Prepared by a verified Expert

Finance Basics: Par value and market value of a bond

Reference No:- TGS01449389

Have a Question? (oR Write a Review)

Recent Questions Asked Finance Basics

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Solution Preview :

Prepared by a verified Expert

Finance Basics: Par value and market value of a bond

Reference No:- TGS01449389

Recent Questions Asked Finance Basics

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