General Power bond carries a coupon rate of 9.5%, nnual interest payments) has 9

Question

General Power bond carries a coupon rate of 9.5%, nnual interest payments) has 9 years until maturity, and sells at a yield to maturity of 85% (Assume What interest payments do bondholders receive each year? Interest payments b. At what price does the bond sell? (Do not round intermediate calculations. Round your answer to 2 decimal places.) rice c. what will happen to the bond price if the yield to maturity falls to 7.5%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) will d. If the yield to maturity falls to 75%, will the current yield be less, or more, than the yield to maturity? O More

Explanation / Answer

a. Interest payments are on principal
so 9.5% (i.e. Rs9.5 assuming face value is Rs100)

b. Bond sells at 106.12
use the formula in excel =price(3/31/2018,3/31/2027,9.50%,8.50%,100,1,0)

c. Using the above formula, replacing 8.5% with 7.5%
Price of bond will be 112.76

d. The current yield will be more assuming the bond is priced at 106.12

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