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What is the today price of the bond

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Suppose you are interested in purchasing a two-year risk-?'ee bond With a face value of $100 and an annual coupon rate of 6%?

(a) What is the today's price of the bond?

(b) What is the yield to maturity for the bond? Round your answer to six digits after the point. (Hint: Set up a quadratic equation of the form (12:2 + bx + c = 0, where a, b and c can be either positive or negative. Now use the quadratic formula 231,2 = 4&- W to solve this equation for YTM.)

(c) Suppose that the 2-year spot rate has increased. How will it a?'ect the today's price of the bond and its yield to maturity?

Reference no: EM133069153

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