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Miller Corporation has a premium bond making semiannual payments. The bond has a coupon rate of...

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Finance

Miller Corporation has a premium bond making semiannualpayments. The bond has a coupon rate of 11 percent, a YTM of 9percent, and 11 years to maturity. The Modigliani Company has adiscount bond making semiannual payments. This bond has a couponrate of 9 percent, a YTM of 11 percent, and also has 11 years tomaturity. Both bonds have a par value of $1,000.

(a) What is the price of each bond today?
(b) If interest rates remain unchanged, what do you expect theprice of these bonds to be 1 year from now? In 2 years? In 6 years?In 10 years? In 11 years?

Answer & Explanation Solved by verified expert
4.4 Ratings (626 Votes)
a Miller Corporation Bond Payment mode Semiannually Par Value 1000 Coupon Rate 11 Coupon Payment 1121000 55 Time to Maturity 11 years YTM 9 Price of Bond 55PA4522 1000PF4522 Price of Bond 55137844    See Answer
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Miller Corporation has a premium bond making semiannualpayments. The bond has a coupon rate of 11 percent, a YTM of 9percent, and 11 years to maturity. The Modigliani Company has adiscount bond making semiannual payments. This bond has a couponrate of 9 percent, a YTM of 11 percent, and also has 11 years tomaturity. Both bonds have a par value of $1,000.(a) What is the price of each bond today?(b) If interest rates remain unchanged, what do you expect theprice of these bonds to be 1 year from now? In 2 years? In 6 years?In 10 years? In 11 years?

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