â¢Assume that the company that you selected for the Module 1 SLP has a bond outstanding that matures in 20 years and has a coupon rate of 6.5%. The par value of the bond is $1,000. â¢If the yield to maturity is 8% and the bond pays interest on an annual basis, whatâs the current price of the bond? Is the bond selling for a premium or discount? How can you tell? â¢If the yield to maturity is 8% but the bond pays interest on a semi-annual basis instead of an annual basis, whatâs the current price of the bond? Is it different from the value when using annual compounding? Explain. â¢Now, assume that the economy enters into a recession and interest rates fall. The bondâs yield to maturity is now 5%. Whatâs the bondâs new price? How does the price compare with your answer in part a? Why did the bondâs value change? â¢A bond matures in ten years and is currently selling for $1,125. The bond pay interest annually, has a par value of $1,000, and a yield to maturity of 10.75%. Whatâs the bondâs current yield?
â¢Assume that the company that you selected for the Module 1 SLP has a bond outstanding that matures in 20 years and has a coupon rate of 6.5%. The par value of the bond is $1,000. â¢If the yield to maturity is 8% and the bond pays interest on an annual basis, whatâs the current price of the bond? Is the bond selling for a premium or discount? How can you tell? â¢If the yield to maturity is 8% but the bond pays interest on a semi-annual basis instead of an annual basis, whatâs the current price of the bond? Is it different from the value when using annual compounding? Explain. â¢Now, assume that the economy enters into a recession and interest rates fall. The bondâs yield to maturity is now 5%. Whatâs the bondâs new price? How does the price compare with your answer in part a? Why did the bondâs value change? â¢A bond matures in ten years and is currently selling for $1,125. The bond pay interest annually, has a par value of $1,000, and a yield to maturity of 10.75%. Whatâs the bondâs current yield?