Question

A bond with a face value of $1,000 matures in 12 years and has a 9% semiannual coupon. The bond has a current yield of 12%. Based on the information, you would expect the bond price to _____________ in one year. (Hint: Find bond price and YTM)

Answer 1

Answer:

Bond price = $750

Bond to yield to maturity = 13.21%

Explanation:

Options are "a. Increase by 8.46% , b. Decrease by 5.68%, c. Increase by 1.32% , d. Increase by 7.00% , e. Decrease by 1.32%.

Bond price = Coupon rate * Face value / Current yield

Bond price = 9% * 1000/12%

Bond price = $750

Future Value =  -$1,000.00

Present Value = $750

N = Number of years x frequency = 12*2 = 24

PMT = Coupon / frequency = 45

Bond to yield to maturity = Rate(NPER, PMT, -PV, FV)*2

Bond to yield to maturity = 13.21%