Important information about Bond Pricing
Not what you're looking for?
A General Motors bond carries a coupon rate of 8 percent, has 9 years until maturity, and sells at a yield to maturity of 7 percent
a) What interest payments do bondholders receive each year?
b) At what price does the bond sell? (Assume annual interest payments.)
c) What will happen to the bond price if the yield to maturity falls to 6 percent?
Please include with your response the formulas required for this problems, as well as the detailed explanation for how to solve them.
Purchase this Solution
Solution Summary
The solution calculates the interest payments that bondholders receive each year, the price at which the bond sells and the change in the bond price if the yield to maturity falls.
Solution Preview
See attached file
A General Motors bond carries a coupon rate of 8 percent, has 9 years until maturity, and sells at a yield to maturity of 7 percent
a) What interest payments do bondholders receive each year?
b) At what price does the bond sell? (Assume annual interest payments.)
c) What will happen to the bond price if the yield to maturity falls to 6 percent?
a) What interest payments do bondholders receive each year?
Annual Coupon payment= 80 =8%*1000
Answer: 80
b) At what price does the bond sell? (Assume annual ...
Purchase this Solution
Free BrainMass Quizzes
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.