What is the price of each bond today

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Bond X is a premium bond making semiannual payments. The bond pays 9 percent coupon, has a yield to maturity (YTM) of 6.5 percent and has 14 years to maturity. Bond Y is a discount bond making semiannual payments. This bond pays a 10 percent coupon, has a YTM of 11.5 percent and also has 16 years to maturity. The par value of the bond is $1,000,

a) What is the price of each bond today?

b) If interest rate remains unchanged what do you expect the price of these bonds to be one year from now? Price of these bonds in eight years from now? Price of these bonds in twelve years from now?

c) If the bond's sale price is $1,150 and has 9 years left from maturity with a face value of $1,000 and pays 15% coupon payment per year or 7.5% coupon semiannually, what is its Yield to Maturity (YTM). If it is a callable bond with call period of 4 years and call premium (if the bond is called) of $1,040 ($1,000 face value and $40 call premium) what is the Yield to Call (YTC) for this bond. Please note, the market price of this bond is $1,150. Also, note that coupon payments are made semiannually.

Reference no: EM132816201

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