Calculate the coupon interest payments

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Consider a corporate bond with a par value of $1,000 that will mature in 10 years. The market’s yield to maturity (YTM) on comparable-risk bonds is 5% per annum. (a) Calculate the coupon interest payments and the price of the bond if the coupon interest rate is 7% per annum, paid annually. (b) Calculate the coupon interest payments and the price of the bond if the coupon interest rate is 7% per annum, paid half-yearly. (c) Explain why the answers to parts (a) and (b) must be more than the par value of the bond. (d) Explain in general why there is an inverse relationship between the price and yield to maturity for bonds.

Reference no: EM131878624

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