Compute their ytm and coupon rate

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(1) ABC Enterprises' bonds currently sell for $1,050. They have a 6-year maturity, an annual coupon of $75, and a par value of $1,000. Compute their YTM, coupon rate, and current yield.

(2) Which of the following non-callable bond has the greatest interest rate risk, i.e. the greatest sensitivity of bond price to interest rate increases?


Maturity

Coupon Rate

a. short-term low coupon bond

1 year

Zero

b. short-term high coupon bond

1 year

10%

c. long-term low coupon bond

30 years

Zero

d. long-term high coupon bond

30 years

10%

Reference no: EM131984708

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