Question 1 - A $1,000 face value bond of Acme Inc. pays an annual coupon and carries a coupon rate of 7.25%. It is was a 30 year bond when issued and it has 9 years remaining to maturity. If it currently has a yield to maturity of 5.75%.
(a) What interest payments do bondholders receive each year?
(b) What is the current bond price?
(c) What is the bond price if the yield to maturity rises to 6.75%?
Question 2 - A 10 year maturity bond with a coupon rate of 5.5% and face value of $1,000 makes semi-annual coupon payments. What is the bond's yield to maturity if the bond is selling for:
(a) 900?
(b) 1,000?
(c) 1,100?