Question

Consider a bond with a 7% annual coupon and a face value of $1,000. Complete the following table. (Enter your responses rounded to two decimal places.) Years to Yield to Current MaturityMaturity Price 2 5% 7% 7% 5% 9% 2 When the yield to maturity is Vthe coupon rate, the bond's current price is below its face value. For a given maturity, the bond's current price as the yield to maturity rises. For a given yield to maturity, a bond's value the coupon rate, a bond's current price equals its face value regardless of the number of years to maturity.

Answer 1

Please provide rating...

we have to use financial calculator to solve this problem.
Put in calculator below for each individual case
N	2	2	3	5	5
I	5%	7%	7%	5%	5%
PMT =1000*7%	-70	-70	-70	-70	-70
FV	-1000	-1000	-1000	-1000	-1000
Compute PV	$1,037.19	$1,000.00	$1,000.00	$1,086.59	$1,086.59
Therefore Current price	$1,037.19	$1,000.00	$1,000.00	$1,086.59	$1,086.59
When yield to maturity is higher than coupon rate, the bond's current price is below its face value.
For a given, maturity, bond's current price decreases as yield to maturity rises
For a given yield to maturity, a bond's value decreases as its maturity increases.
When the yield to maturity is same as the coupon rate , bond's current price equals its face value regardless of the number of years to maturity