Assignment:
Consider the two bonds described below:
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Bond A
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Bond B
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Maturity
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15 yrs
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20 yrs
|
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Coupon Rate (Paid semiannually)
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10%
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6%
|
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Par Value
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$1,000
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$1,000
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a. If both bonds had a required return of 8%, what would the bonds' prices be?
b. Describe what it means if a bond sells at a discount, a premium, and at its face amount (par value). Are these two bonds selling at a discount, premium, or par?
c. If the required return on the two bonds rose to 10%, what would the bonds' prices be?