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What is the rate required in the market

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You have just purchased a newly issues $100 five-year bond at par. This bond (bond A) pays $4 in interest semi-annually ($8 per yers). You are also negotaitng the purchase of a $100 six-year bon that pays $5 semi-annually and has five years to maturity (bond B)

a) what is the rate required in the market (the yield) on the bonds assuming that they have the same risk?

b) What should you be willing to pay (at most) for bond B?

c) how will your answer to part (b) chnage if bond A pays $3 (insread of $4) in semi-annual interest but still sells for $100?

Reference no: EM132999368

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