Estimating current price of given bond

Reference no: EM1338656

DEF has an outstanding debt issue. The debt maturity is May 10, 2018 with a 6.25% coupon, which is paid semiannually. The bond has a face value of $1000 and yield is 1.61% compounded semiannually.

1. Estimate the price of the bond on November 10, 2014 after the coupon is paid.

2. Company B purchases the bond on November 10, 2014 for the price above. The bond is sold in one year for $1160. Calculate the return. Why is it different from the original yield to maturity assuming that you collect two payments?

Reference no: EM1338656

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