01 Jan 2024: Assume you have purchased a bond with a Par Value of $1,000.00 paying 4.5%. You paid the market price (which happened to be par value).
What is the annual coupon payment?
What is the current yield?
08 Jan 2024:Now assume that one week later the Fed announces a 50 basis point reduction in rates.
What is the annual coupon payment?
What is the market price of your bond? What is the new current yield?
05 Feb 2024: OOPS!...now the Fed reverses course and raises interest rates 100 bp.
What is the annual coupon payment?
What is the market price of your bond?
What is the new current yield?
How would the following affect the yield on a newly issued bond? Please explain your answer. No calcs are needed.
The bonds are callable.
The bonds are subordinated to the existing bond issue.
The bond rating is better or worse than the Moody's Aa3 that the firm anticipates.