Show all work
(1) ABC Enterprises' bonds currently sell for $1,050. They have a 6-year maturity, an annual coupon of $75, and a par value of $1,000. Compute their YTM, coupon rate, and current yield.
(2) Which of the following non-callable bond has the greatest interest rate risk, i.e. the greatest sensitivity of bond price to interest rate increases?
|
Maturity
|
Coupon Rate
|
|
a. short-term low coupon bond
|
1 year
|
Zero
|
|
b. short-term high coupon bond
|
1 year
|
10%
|
|
c. long-term low coupon bond
|
30 years
|
Zero
|
|
d. long-term high coupon bond
|
30 years
|
10%
|