Problem:
A high-yield bond has the following terms: Principal amount $1,000 Annaul Interest Paid $100 Maturity 10 years.
Required:
Question 1: What is the bond's price if comparable debt yields 12 percent?
Question 2: What would be the price if comparable debt yields 12 percent and the bond matures after five years.
Question 3: What are the current yields and yields to maturity in a and b?
Question 4: What would be the bond's price in a and b if interest rates declined to 9 percent?
Question 5: What are the curretn yield and yield to maturity in d?
Question 6: What two generalizations may be drawn from the above price changes?
Note: Explain all steps comprehensively.