What quoted yield to maturity on a semiannual coupon bond

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1. You can purchase a 10 year, 4.500% coupon note that pays interest quarterly and has a quoted yield to maturity of 3.855%. However, you prefer to invest in semiannual coupon bonds.

(a) What quoted yield to maturity on a semiannual coupon bond would make you indifferent between that bond and the quarterly coupon bond described above?

(b) There is a special name for the yield to maturity on a semiannual coupon bond. What is it?

2. Suppose that a four-year FRN pays three-month Libor plus a quoted margin of 1.00% on a quarterly basis. Currently, three-month Libor is 1.55%. The discount margin is currently 0.90%. Calculate the price of the bond.

Reference no: EM132184047

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