At what percent of par value is price of security

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Reference no: EM131906112

Suppose $200 million of Mortgage Backed Bonds (MBB’s) are issued against a $300 million pool of mortgages, in denominations of $10,000 for a period of 10 years. The bonds carry a coupon of 8% payable annually. Assume the securities receive the highest possible rating. a. What is the price of the security, assuming the issuer and underwriter agree that the rate of return required to sell the bonds is 9% ? b. At what percent of par value is the price of the security? c. If the required rate of return is also 9% two years after the issue, what is the price of this security, and what is the percent of par value? d. Answer parts a, b, c again, this time assuming the rate of return (i.e., yield to maturity) is 7%.

Reference no: EM131906112

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