bond has the following terms: Principal amount $1,000 Semi-annual interest $50 Maturity 10 years (When asked f

round yields to nearest tenth of a percent, such as 10.1 %.) a. What is the bond's price if comparable debt yields 12
would be the price if comparable debt yields 12% and the bond matures after 5 years? c. What are the current yield
maturity if a. and b.? d. What would be the bond's price in a. if interest rates declined to 8%? What if the bond mat
years? e. What are the current yields and yields to maturity in d.? f. What two generalizations may be drawn from
changes?

a)
Settlement Date
01/01/00
Maturity Date
01/01/10
Coupon Rate
10.00%
Yield to Maturity
12.00%
Redemption Value (% of par)
100
Number of Payments
2
Price (% of par)
88.53007878
Price
$885.30
b)
Settlement Date
01/01/00
Maturity Date
01/01/05
Coupon Rate
10.00%
Yield to Maturity
12.00%
Redemption Value (% of par)
100
Number of Payments
2
Price (% of par)
92.63991295
Price
$926.40
c)
Coupon Payment
Current Yield for a
Current Yield for b
d-1)
Settlement Date
Maturity Date
Coupon Rate
Yield to Maturity
Redemption Value (% of par)
Number of Payments

$50
5.6%
5.4%

01/01/00
01/01/10
10.00%
8.00%
100
2

Price (% of par)
Price

113.5903263
$1,135.90

d-2)
Settlement Date
01/01/00
Maturity Date
01/01/05
Coupon Rate
10.00%
Yield to Maturity
8.00%
Redemption Value (% of par)
100
Number of Payments
2
Price (% of par)
108.1108958
Price
$1,081.11
e)
Coupon Payment
Current Yield for d-1
Current Yield for d-2

$50
4.4%
4.6%

f)
1) There is an invesre relationship between interest rates (YTM) and the price of the
bond; the higher the YTM, the lower the price of the bond, and the lower the YTM,
the higher the price of the bond.
2) All things equal, the longer the time to maturity, the greater the interest rate risk

urity 10 years (When asked for a % yield,

if comparable debt yields 12%? b. What
c. What are the current yields and yields to
o 8%? What if the bond matures after 5
zations may be drawn from the above price