Question

nb icha long Suppose that Ford issues a coupon bonds at a price of $1,000, which is the same as the bond's par value. Assume the bond has a coupon rate of 5% pays the coupon once per year, and has a maturity of 10 years. If an investor purchased this bond at the price of $1,000, for each year except the last year, the investor would receive a payment of $ (Round your answers to the nearest dollar.) decr When the bond matures, the investor would receive a final payment of $1. (Round your answers to the nearest dollar) Now suppose the price of the bond changes to $990. "Spar ields Assuming an investor purchased the bond at a price of $990, the investor would receive a current Viold equal to (Round your answer to two decimal places.) it bone BCC e of ds spend ms

Answer 1

1)

Coupon = 5% of 1000 = 50

Payment of = $50

2)

Final payment = Final coupon payment + face value

Final payment = $50 + $1000

Final payment = $1050

3)

Current yield = (Annual coupon / price) * 100

Current yield = (50 / 990) * 100

Current yield = 5.05%