Suppose that you are considering investing in a 4-year bond that has a face value of $1,000 and a coupon rate of 5.3%. a.) If the market interest rate on similar bonds is 5.3%, the price of the bond is $1000. (Round your response to the nearest cent.) The bond's current yield is 5.3 %. (Round your response to two decimal places.) b.) Suppose that you purchase the bond, and the next day the market interest rate on similar bonds falls to 4.3%. The price of the bond will be $. (Round your response to the nearest cent.)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Suppose that you are considering investing in a 4-year bond that has a face value of $1,000 and a coupon rate of
5.3%.
a.) If the market interest rate on similar bonds is 5.3%, the price of the bond is $ 1000. (Round your response to the
nearest cent.)
The bond's current yield is 5.3 %. (Round your response to two decimal places.)
b.) Suppose that you purchase the bond, and the next day the market interest rate on similar bonds falls to 4.3%.
The price of the bond will be $
(Round your response to the nearest cent.)
Transcribed Image Text:Suppose that you are considering investing in a 4-year bond that has a face value of $1,000 and a coupon rate of 5.3%. a.) If the market interest rate on similar bonds is 5.3%, the price of the bond is $ 1000. (Round your response to the nearest cent.) The bond's current yield is 5.3 %. (Round your response to two decimal places.) b.) Suppose that you purchase the bond, and the next day the market interest rate on similar bonds falls to 4.3%. The price of the bond will be $ (Round your response to the nearest cent.)
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