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What price should you pay for the bond today

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Reference no: EM133027212

Question - You are considering the purchase of a Treasury bond in the secondary market. Bonds with exactly 12 years to maturity, paying a half-yearly coupon of 5.00 per cent per annum, are currently yielding 5.50 per cent per annum. The bond has a face value of $1000.

a) What price should you pay for the bond today?

b. What will happen to the price of the bond today if the current yield immediately falls to 3.80 per cent per annum?

Reference no: EM133027212

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