Suppose a seven ar, $1,000 bond with a 7.9%coupon rate and somannual coupons ist

Question

Suppose a seven ar, $1,000 bond with a 7.9%coupon rate and somannual coupons istrading wth a yield to maturity of6.43%. a. Is this bond currently trading at a discount, at par, or at a premium? Explain b.Ifthe yield to maturky ofthe bond rises to 7.39% (APR with seniarnual compounding). what price wil the bond trade for? a. Is this bond currently trading at a discount, at par, or at a premium? Explain (Select the best choice below) OA. Because to yield to maturity is less than the co n rate, to bond istradingdiscount. OB. Bocause t yield to maturity is geater than he coupon rote, the bond is trading at par. C. Because the yield to maturity is less than the coupon rate, the bond is trading at a premiumm. O D. Because the yield to maturity is greater than the coupon rate, the bond is trading at a premium b. If the yield to maturity of the bond rises to 7.39% (APR with semiannual oompounding what price wil the bond trade for The new price of the bond is (Round to the nearest cent) Q: S Que Click to select your answerls). Save for Later MacBook Air 2 3 4 tab caps lock

Explanation / Answer

Par Value $1,000 Coupon Amount 39.5 1000*7.90%/2 Semi Annual Yield 0.03215 6.43/2 Years Cash flow Discount factor @ 3.215% Present Value 1 39.5 0.968851 38.26963 2 39.5 0.938673 37.07759 3 39.5 0.909435 35.92267 4 39.5 0.881107 34.80373 5 39.5 0.853662 33.71965 6 39.5 0.827072 32.66933 7 39.5 0.801309 31.65172 8 39.5 0.77635 30.66582 9 39.5 0.752168 29.71062 10 39.5 0.728739 28.78518 11 39.5 0.70604 27.88856 12 39.5 0.684047 27.01987 13 39.5 0.66274 26.17824 14 1039.5 0.642097 667.4597 Present Value of Bond 1081.822 The Bond is selling at premium because yeild to maturity is less than the coupon rate Par Value $1,000 Coupon Amount 39.5 1000*7.90%/2 Semi Annual Yield 0.03695 7.39/2 Years Cash flow Discount factor @ 3.695% Present Value 1 39.5 0.964367 38.09248 2 39.5 0.930003 36.73512 3 39.5 0.896864 35.42612 4 39.5 0.864906 34.16377 5 39.5 0.834086 32.9464 6 39.5 0.804365 31.77241 7 39.5 0.775703 30.64026 8 39.5 0.748062 29.54844 9 39.5 0.721406 28.49553 10 39.5 0.6957 27.48014 11 39.5 0.67091 26.50093 12 39.5 0.647003 25.55661 13 39.5 0.623948 24.64595 14 1039.5 0.601715 625.4824 Present Value of Bond 1027.487 Value of Bond = $ 1027.49

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