One bond has a coupon rate of 5.4%, another a coupon rate of 8.2%. Both bonds pay interest annually, have 13-year maturities, and sell at a yield to maturity of 7.5%. a. If their yields to maturity next year are still 7.5%, what is the rate of return on each bond? b. Does the higher-coupon give a higher rate of return over this period?
One bond has a coupon rate of 5.4%, another a coupon rate of 8.2%. Both bonds pay interest annually, have 13-year maturities, and sell at a yield to maturity of 7.5%. a. If their yields to maturity next year are still 7.5%, what is the rate of return on each bond? b. Does the higher-coupon give a higher rate of return over this period?
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 4P
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One bond has a coupon rate of 5.4%, another a coupon rate of 8.2%. Both bonds pay interest annually, have 13-year maturities, and sell at a yield to maturity of 7.5%.
a. If their yields to maturity next year are still 7.5%, what is the
b. Does the higher-coupon give a higher rate of return over this period?
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