How much should the pension fund be willing to pay

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Problem 1: XYZ corp issued a $1,000 face value 25- year fixed coupon bond 15 years ago with a coupon rate of 3.4%. Currently this bond is trading at $959.24 with a current yield of 3.54% and Yield to maturity of 3.90%. Since XYZ corp needs funding for a new project it intends to issue a new 10 year bond and would like to price it at par when the new bond is issued. What should the coupon rate of this new bond in order to be priced at par?

Problem 2: A pension fund aims to invest in a bond with face value of $1,000 and fixed annual coupon payments of $61.00. If the bond has 10 years to maturity how much should the pension fund be willing to pay for the bond if it aims to earn a yield to maturity of 6.0%?

Reference no: EM132856823

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