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    T-bonds: Price, Coupon Rate and Yield to Maturity

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    A 10-year Corporate bond is issued with a face value of $100,000, paying interest of $2,500 semi-annually. If market yields decrease shortly after the T-bond is issued, what happens to the bond's:

    a. Price?

    b. Coupon rate?

    c. Yield to maturity?

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    Solution Preview

    a. Number of periods = 10*2 = 20
    Future value = $100,000
    Payment every period = 2500

    The present value of each cash flow formula is:
    PV = CF / (1+r)^n
    where CF is the future ...

    Solution Summary

    This solution uses step by step calculations to determine the price, coupon rate, and yield to maturity of the bond if the market yields decrease.