You have two bonds, Bond A and bond B: A 3-year zero-coupon bond with face value of $1,000 with a yield-to-maturity of 4%. A 6-year bond with an annual coupon payment C (to be paid out starting a year from now), a face value of $1,000 and yield-to-maturity of 5%. Assume that compounding takes place annually. If the price of Bond A is equal to the price of Bond B, what is the value of Bond B’s coupon payments (C)?
You have two bonds, Bond A and bond B: A 3-year zero-coupon bond with face value of $1,000 with a yield-to-maturity of 4%. A 6-year bond with an annual coupon payment C (to be paid out starting a year from now), a face value of $1,000 and yield-to-maturity of 5%. Assume that compounding takes place annually. If the price of Bond A is equal to the price of Bond B, what is the value of Bond B’s coupon payments (C)?
Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
Chapter11: Bond Pricing And Amortization (bonds)
Section: Chapter Questions
Problem 3R
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Do not use excel, use formulas to compute the question
You have two bonds, Bond A and bond B:
- A 3-year zero-coupon bond with face value of $1,000 with a yield-to-maturity of 4%.
- A 6-year bond with an annual coupon payment C (to be paid out starting a year from now), a face value of $1,000 and yield-to-maturity of 5%.
Assume that compounding takes place annually.
If the price of Bond A is equal to the price of Bond B, what is the
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