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A 30-year maturity bond makes annual coupon payments and has a coupon rate of 8%. What...

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Finance

  1. A 30-year maturity bond makes annual coupon payments and has acoupon rate of 8%. What are the bond’s current yield and yield tomaturity if the bond is selling for:

    a. $900 b. $1,000 c. $1,100

  2. Recalculate yields in problem 1 assuming semiannual couponpayments.

Answer & Explanation Solved by verified expert
4.4 Ratings (611 Votes)
For annual coupon paymentsSuppose the face value of the bond1000Coupon rate8Annual coupon paymentFace valueAnnual couponrate1000880Time period or number of periods when coupon payment is madeannually30 yearsCurrent yieldAnnual Coupon paymentCurrent Bond Pricea When current price of the bond is 900    See Answer
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Transcribed Image Text

A 30-year maturity bond makes annual coupon payments and has acoupon rate of 8%. What are the bond’s current yield and yield tomaturity if the bond is selling for:a. $900 b. $1,000 c. $1,100Recalculate yields in problem 1 assuming semiannual couponpayments.

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