Consider a bond issued by XYZ corporation. The bond will mature after 20 years and has a coupon rate of 8%. Identical bonds have YTMs of 14%. (Use manual calculations)
a) What is a reasonable price for XYZ’s bond?
b) What will its price be after 2 years if the YTM on identical bonds remains at 14%?
c) What will the bond’s price be after two years if the YTM on identical bonds falls to 9%?
d) Suppose the XYZ bond is currently selling for $875, what is its YTM?