Explain the relationship between price of a bond

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a. Explain the relationship between price of a bond and its yield to maturity (YTM), and why is it so?

b. Explain why some bonds sell at a premium over par value while other bonds sell at a discount. What do you know about the relationship between the coupon rate and the YTM for premium bonds? What about for discount bonds? For bonds selling at par value?

c. Tildat Plc has 7.4 per cent coupon bonds on the market that have 11 years left to maturity. The bonds make semi-annual payments. The par value of the bond is £1000. If the YTM on these bonds is 5.4 per cent, what is the current bond price?

d. Peevee has 7.6 per cent coupon bonds making annual payments with a YTM of 6.5 per cent. The current yield on these bonds is 6.8 per cent. How many years do these bonds have left until they mature?

e. You purchase a bond with a coupon rate of 5.94 per cent and a clean price of €11,070, face value is €10,000. If the next semi-annual coupon payment is due in 1 month, what is the invoice price?

Reference no: EM132730250

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