Bond A has the following terms (assume annual coupons) coupon rate 10% principal $1000 term to...
Bond A has the following terms (assume annual coupons) coupon rate 10% principal $1000 term to maturity 8 years Bond B has the following terms coupon rate 5% principal $1000 term to maturity 8 years What is the price of bond A if interest rates are 10%?
Homework Answers
Solution:
Principal amount of bond A = $1000
Coupon rate of bond A = 10%
Interest rate = 10%
Since coupon rate of bond A is equal to interest rate, therefore it means bond A is issued at par.
Hence price of bond A (issued at Par) = $1000
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