Maximum price you should be willing to pay for bond

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Reference no: EM131861557

1. Assume that you are considering the purchase of a 20-year, noncallable bond with an annual coupon rate of 9.5%. The bond has a face value of $1,000, and it makes semiannual interest payments. If you require an 10.7% nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond? a. $1,000.99 b. $901.80 c. $874.74 d. $721.44 e. $910.81

2. We buy a 10 year, 7% bond when rates are 12% and sell it when they are 16% in 8 years. What is the price we sell and buy it at? show equation work please.

Reference no: EM131861557

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